First there was COVID, then the U.S. West Coast labor disputes, and now a change in weather patterns is wreaking havoc on the global supply chain. However, these new weather-related issues have the potential to bring permanent negative change to the industry.
The clearest example of how the environment is affecting the shipping industry can be seen at the Panama Canal. The canal, through which six percent of all global trade passes through, has been seeing water levels drop significantly since early summer. This drop in water levels is due to a drought in the area, and the ongoing situation has forced the Panama Canal Authority to extend draft restrictions which, according to a CNBC report, caused a container vessel backlog of nearly six days. Experts from the U.S. Environmental Protection Agency (EPA) believe this new pattern could become permanent (link to our story), which could change how trade from the Far East to the U.S. East Coast is conducted.
In the United States, low water levels on the Mississippi River are plaguing the industry by hindering the transport of goods inland. The low water levels are responsible for multiple groundings and have created a backlog of more than 2,000 barges along the Lower Mississippi just south of a key junction where the Missouri and Ohio Rivers connect. The lack of water has negatively impacted the movement of all freight being transported between the U.S. heartland and the Gulf of Mexico.
“This is not just a problem affecting the Western Hemisphere. A comparable situation has been unfolding in Germany along the Rhine River, which has been experiencing significant problems transporting freight due to low water levels,” said John Ogilvy, Station Manager of OEC Group’s St. Louis office. “If these patterns continue, then rail systems everywhere will have to pick-up the slack, or timelines will have to be drastically revamped.”
These issues with our rivers and canals are not isolated to the water, but they are beginning to have a compounding effect on our inland systems due to barge restrictions. If barge restrictions continue to climb, then the responsibility to transport excess cargo will logically shift to the rail. While this switch has not occurred, it still does not seem that the system can manage any extra pressure. Recent statistics have shown that rail dwell times from LA-Long Beach are currently averaging four days without any prospective additional cargo being put into the system. One does not need to look further than Union Pacific’s recent actions to understand why dwell times have increased, as the company responded to decreased volume levels by storing hundreds of their locomotives and also furloughing some of their mechanical employees, leaving them short handed if they need to transport more goods inland.
Another option, trucking, also cannot be relied on to fill the void if weather conditions remain the same, as the industry is still having recruitment issues and continued difficulty securing proper pick-up slots at ports like LA-Long Beach. This is problematic when volume is low but can be a significant issue if a sustained and significant increase occurs.
“While it is clear that we have an obvious environmental problem, the real issue is that major infrastructure improvements need to happen in order for our back-up solutions of rails and trucks to be viable,” said Frank Costa, Vice President of Sales for OEC Group’s New York office. “Our choice for the future is obvious, either improve our efforts with climate change or invest in our infrastructure.”