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Tag: Panama canal

Geopolitical Shipping Analysed

Posted on by David Priestman

While the main focus is on tariffs, trade lanes – as arteries of the world economy – have turned global logistics operators into key players, writes guest columnist Gino Baldissare.

More than five decades ago, there were some commodities that played a key role in the global economy: grains, petroleum and metals. They were like certain electrolytes that are critical for the human body. Today, while they remain key to our economic development, others have joined the ranking, especially those linked to the technological industry: rare earths.

But if we aim to complete the Top 5 of key commodities, we must have a look at a more intangible sector, like the cardiovascular system of global value chains: international logistics. Whether we look at the last four or five years, or the last four or five months, we can see how important global logistics operators have become. This is the reason why the magnifying glass of international geopolitics is on them.

In order to dive into some examples, we can start with some triggering names like Cosco Shipping, Panamá, China, United States, and Germany, to say a few.

Targeting China`s Logistic Arms

The China Ocean Shipping Company (COSCO) is the third-largest shipping company in the world. It is considered a strategic agent of the Chinese Government when it comes to worldwide transport and logistics; the same as Hutchinson Ports, the port business unit of CK Hutchinson Holdings Ltd.

Last January, the United States added COSCO to a list of companies that allegedly support China’s military foreign policy, explicitly qualifying them as ‘Chinese military companies’, because of having provided commercial services or goods to the People’s Liberation Army or related organizations. It must be remarked that it is a blacklist for the Department of Defense, mostly targeting companies with potential impact on national security.

Shortly after the blacklisting became public, COSCO published a statement: “COSCO SHIPPING and its subsidiaries have consistently adhered to local laws and regulations, maintaining strict compliance in all international operations. We remain committed to facilitating global trade and providing high-quality commercial shipping and logistics services to clients worldwide, including agricultural producers, manufacturers, energy firms, retailers, and exporters in the United States”.

In the same month, the US escalated its actions focused on China’s increasing role in the international maritime market. The Office of the Trade Representative (USTR) published the Report on China`s Targeting of the Maritime, Logistics and Shipbuilding Sectors for Dominance, which informs that “China increased its share of global shipbuilding tonnage from 5% in 1999 to over 50% in 2023 because of massive state subsidies and preferential treatment for state-owned enterprises that are squeezing out private-sector international competitors. The agency said that U.S. shipyards were building 70 ships in 1975, but just five annually today”.

However, it is not only an action over China’s growing domination of the global shipbuilding. The fees are intended to curb China’s growing commercial and military power on the maritime market and promote domestically built vessels inside the United States. This USTR proposal of charging up to $1.5 million for Chinese-built vessels entering US ports, initiated during Biden administration, did not change once Trump debuted his second presidential period. During April 2025, it has been implemented through more specific actions and periods of time, aiming to a phased in approach to avoid a sudden shock.

The instrumentation considers a grace period of 180 days, after which it will include:
• Fees on China-based vessel owners and operators based on net tonnage per US voyage.
• Fees on operators of Chinese-built ships based on net tonnage or containers discharged.
• To incentivise US-built car carrier vessels, fees on foreign-built car carrier vessels based on their capacity.

Why COSCO?

While it operates as a commercial entity, it is subject to government oversight through monitoring by governmental bodies, that regulate not only corporate governance but also ensure the company adheres to national security and economic policies. The State-owned Assets Supervision and Administration Commission (SASAC) is the Chinese body that controls state assets and ensures they are used in alignment with government priorities. SASAC monitors the performance of state-owned enterprises like COSCO, making sure they contribute to China’s broader economic, strategic, and foreign policy goals.

Therefore, while not being a direct ‘executing arm’ of China’s foreign policy, its operations within the logistic field align closely with China’s strategic goals, especially through initiatives like the ‘Belt and Road’ and its global shipping and port investments. The company is expected to support China’s economic and geopolitical goals.

In Europe

During the last 15 years, COSCO’s investments in European ports have been growing, not only in terms of participation percentages in port terminals management, but also from a geographical perspective. Targeting ports both on the North Sea and in the Mediterranean plays a significant role in terms of strategic trade lanes.

The most recent example is Hamburg Port. In 2022, the proposed investment by COSCO Shipping Ports Limited (CSPL) in the Port of Hamburg’s Container Terminal Tollerort (CTT) became a focal point of political debate within Germany. Initially, COSCO aimed to acquire a 35% stake in CTT, a terminal operated by Hamburger Hafen und Logistik AG (HHLA). However, the German government approved a reduced investment of 25%, ensuring that COSCO would not gain management rights or strategic influence over the terminal.

This decision was not without controversy. The German Foreign Ministry expressed concerns that the investment could disproportionately enhance China’s strategic influence over German and European transport infrastructure, potentially increasing Germany’s dependence on China. The ministry highlighted risks of allowing China to politically instrumentalize critical infrastructure in times of crisis.

Chancellor Olaf Scholz advocated for the investment, emphasizing its economic benefits and downplaying security risks. He argued that rejecting the deal could harm Hamburg’s competitiveness as a major European port. Conversely, other government factions opposed the investment, citing security and sovereignty concerns. HHLA clarified that the investment would not grant COSCO access to the Port of Hamburg or HHLA, nor would it provide strategic know-how. The port infrastructure would remain publicly owned, and HHLA would retain sole control over all major decisions. The terminal would remain open to all customers, with COSCO not receiving exclusive rights.

The Panama Canal

In December 2024, President-elect Donald Trump criticized Panama’s management of the Panama Canal, complaining about the transit fees, and urging Panama to reduce them to avoid any attempt from US to reclaim control. These declarations were not isolated from broader concerns about China’s influence in the region. The US administration expressed apprehensions about potential Chinese control over the canal, suggesting that China could close it during conflicts. Panama consistently denied such claims, reaffirming its independent control over the canal and rejecting any undue foreign influence.

In response, Panamanian President José Raúl Mulino firmly asserted Panama’s sovereignty over the canal. He remarked that every square meter of the Panama Canal and its adjacent zones belongs to Panama and will continue to do so, emphasizing that the nation’s sovereignty is non-negotiable. Mulino also refuted claims of Chinese military presence or control over the canal, stating that “no control, direct or indirect, neither from China, nor from the European Community, nor from the United States or any other power.”

However, these tensions seem to have cooled over the months, reaching a “mutual commitment to address shared security challenges” during April 2025. The Panama Canal Authority (ACP) said this declaration “reaffirms respect for, and the recognition of, Panamanian sovereignty over the interoceanic waterway, as well as compliance with the Neutrality Treaty and the legal framework governing its operation”.

The declaration is also intended to help to develop a compensation mechanism for services provided to warships and auxiliary vessels, seeking a cost-neutral basis, and considering the existing co-operation with the US Department of Defense, in areas including engineering, security, and cybersecurity.

Era of Shipping Geopolitics

These developments highlight the complex interplay of geopolitical interests and national sovereignty over key transport infrastructure and global logistic players around the world. As long as they remain as pivotal assets, attracting the strategic interests of global powers, these tensions are likely to continue as a reflection of the geopolitical landscape surrounding the arteries of the world economy. Today, more than ever, it is clear that it is not only a matter of having the electrolytes. It is key to manage the means to transport them to the destinations of interest.

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Global Supply Chains Forced to Change Rapidly

 

Supply Chain Resilience from Transparency and Collaboration

Posted on by Keith McKinley

Cost savings used to be at the top of supply chain managers’ agendas. However, in an increasingly volatile world, the design of robust value chains is increasingly becoming the focus of decision-makers. This is likely to remain the case for the future, writes Ralf Duester, Managing Director, Setlog GmbH.

Many ships are currently avoiding the Suez Canal because of the Houthi rebels. In 2023, extreme drought caused ships to jam at the Panama Canal. According to Setlog Managing Director Ralf Duester, companies need to establish robust and transparent supply chains due to supply chain problems like these so that they can react quickly.

A non-maneuverable container ship causes a bridge in Baltimore to collapse, Houthi rebels hijack ships in the Red Sea, storms flood the desert city of Dubai: reports like these give many supply chain managers sleepless nights. Supply chains are interrupted overnight, freight capacities and equipment are missing without warning. Supply chain managers need to find new transport routes, ports or suppliers, plan with longer lead times, produce earlier or faster or select more expensive modes of transportation. Geopolitical, economic, ecological and technical changes put global supply chains under pressure at short intervals – or even interrupt them.

As a result, the topic of supply chain resilience is at the top of the agenda for supply chain managers. Things were different a few years ago. Take Germany, for example: the “Trends in Logistics & SCM” study conducted by the German Logistics Association BVL in 2023 shows that cost pressure was the most important topic for decision-makers in 2016, but in 2023 it only ranks fourth. Cybersecurity is now the top priority, followed by digitalization and the shortage of skilled workers. Many measures in terms of cyber security and digitalization contribute to making supply chains more robust.

Resilience can basically be divided into two components: the operational, reactive component and the strategic, proactive component. The latter requires top managers in companies to fundamentally rethink their decisions. They need to find ways to strengthen the robustness of the supply chain through decisions in sourcing, product design, production, planning and logistics.

Basically, all companies need to think about supply chain resilience. Companies with global operations – such as automotive suppliers, semiconductor manufacturers or consumer goods specialists – are particularly affected by supply chain disruptions. To make matters worse, importers of fast-moving consumer goods (FMCGs), for example, have no choice but to purchase their products in Asia or countries outside Europe for cost reasons. If they were to produce in Germany, they would generally not be competitive.

Storms, disasters, war: although a large number of negative events occur every year, it is frightening to see how slowly companies can react to such disruptions to supply chains – even in highly industrialized countries. Current surveys show that in Germany, for example, on average only one in ten companies is able to respond to a serious disaster within 24 hours. Although there are exceptions – for example in the oil and gas industry – this average value shows the risks that many companies take on a daily basis.

One reason for long response times is the fact that companies still use Excel lists as the basis for managing their supply chains – and there are quite a few of them: More than a third of German companies rely solely on this program, supplemented by emails and frantic phone calls to obtain information, which is then re-entered into the existing Excel lists or merchandise management systems.

In general, statistics show that larger corporations in particular have strengthened their supply chains with the help of various instruments. Smaller companies and SMEs are lagging behind – or are still at the beginning of a transformation phase.

The good news for everyone is that there is a whole range of measures that companies can use to achieve success relatively quickly. Supply chain champions usually start with an analysis, looking at the areas in which risks are suspected and what impact these could have on the company’s performance. Those responsible then define the levers that best address the identified risks. They take a cross-functional approach: This is because the causes are generally not to be found where the consequences of supply chain weaknesses appear.

Companies are well advised to turn a whole series of screws in parallel in order to strengthen their resilience in the areas of supply chain and procurement. These include in the area of supply chain: Segmentation of the supply chain; Strengthening of integrated planning; Inventory management according to risk criteria; Diversification of freight forwarders; Re-evaluation of the network design.

The following applies to purchasing: Multi-sourcing strategies for critical components; Creation of supplier risk profiles; Development of regional suppliers; Closer cooperation with suppliers; Creating transparency in terms of actual supplier capacities.

To accomplish all this, the development and use of centralized, digital cross-company solutions and data exchange between different systems are an important step in enabling collaborative, partnership-based cooperation with business partners globally. Nowadays, this is easily possible with intelligent API interfaces, so that the silo of management or the ERP system can be broken down and easily linked with intelligent solutions and the data flow is optimized.

The issue of skilled labour shortage also shows that these methods are the only way to avoid redundancies in day-to-day work, make better use of skilled employees’ working time and make faster, higher quality decisions.

Incidentally, supply chain champions pay more attention to product design and production, because these areas in particular can lay the foundations for a more robust supply chain. They consistently tackle issues such as modular design, component standardization, raw material composition and supplier origin.

However, in order to make supply chains more robust in the long term, companies need to do more than just implement individual measures. In order to achieve cost efficiency, growth and resilience at the same time, SCM managers should rethink and redefine the decision drivers in the supply chain. As a rule, costs, quality and time or service level are regarded as decision drivers in supply chain management. The configuration of a supply chain takes a position on these drivers, which cannot be improved at the same time. Leading global players consider resilience to be a key decision driver – alongside sustainability and agility.

Some companies mistakenly assume that there is a conflict between the drivers of costs and resilience. The following aspects are important in this context: The aim of resilience is also to avoid costs in the medium and long term. However, this does not necessarily have to involve short-term costs and redundancies. Many initiatives to strengthen supply chains make it possible to increase cost efficiency at the same time, so that resilience levers can certainly be implemented, for example with the secondary condition of cost neutrality.

Many supply chain strategists segment supply chains. Sometimes very successfully. If, for example, higher stock ranges are to apply to critical parts, actual and target stock levels must be analyzed. This is a simple way for companies to achieve inventory savings for less critical parts. Other levers relating to visibility and supplier integration generally achieve more efficient processes, more precise planning and automation options.

Despite the change in many people’s minds, the fact remains that resilience and risk management with a focus on supply chains are still being neglected from an organizational perspective. Competent teams can ensure cross-functional coordination and establish communication channels for faster risk identification. In this context, the best of the best simulate various crises, also known as “war gaming”. Unfortunately, many companies lack the required knowledge of which future scenarios could occur due to negative geopolitical, economic and ecological events. However, knowing which scenarios could happen forms the basis for developing suitable countermeasures and thus strengthening the resilience of the supply chain.

Over the next few years, digitalization and artificial intelligence will make even more tools available that can strengthen the robustness of supply chains. Whatever these solutions look like, they are anything but superfluous. The topic of resilience is not just hype, it will be a constant concern.

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Improve Supply Chain Resilience in Infrastructure Project Delivery

 

Navigating Supply Chain Disruption

Posted on by David Priestman

Supply chain disruption: how to navigate ‘never normal’ distribution networks, by Andy Grygiel (pictured), CMO at project44.

Today, managing an organisation’s supply chain can feel like an impossible task. Modern multi-tier logistics networks are spread between hundreds of suppliers across multiple continents—under this globalised model, businesses enjoy maximised distribution efficiency when all is well. However, with supply chains rarely running normally, they also suffer damaged transparency, resilience, and reputation at the slightest setback.

Unfortunately, growing numbers of high-profile supply chain disruptions—from the Ever Given container ship running aground in the Suez Canal to attacks on trade vessels by Houthi rebels in Yemen—show that organisations’ logistics systems require greater support than ever. Let’s explore the potential effects of these often-unforeseen challenges on your business and consumers, and how intelligent supply chain technology can help mitigate them.

Overcoming extreme weather as soon as it occurs

Weather forecasts aren’t simply there to help you decide whether you need to carry an umbrella—they also play a key role in worldwide trade. And as climate change triggers an increased number of extreme weather events, organisations today rely on weather condition data to ensure their supply chains continue to run smoothly. But access to this information is only the first step. Without the capacity to then quickly reroute vessels to reduce delays in trade routes, these events become increasingly difficult to overcome.

Take recent developments in the Panama Canal. This crucial maritime trade conduit, connecting the Atlantic Ocean with the Pacific, is responsible for 40% of worldwide vessel traffic. It’s also grappling with persistent drought conditions that have reduced its capacity by as much as 30%, leading to lengthy trade disruptions and reductions. The immediate cause is the naturally occurring El Niño warm-weather phenomenon. However, scientists also now believe that widespread climate change is behind prolonged dry spells and even higher temperatures in the Panama region.

Similarly disruptive weather events are taking place right across the globe. So, businesses need intelligent, high-velocity supply chain platforms to help them accordingly adapt their routes and make sure trade remains as seamless as possible. For instance, if severe weather impacts a city during the holidays, visibility into last mile solutions with real-time predicted ETAs will allow companies to make re-routing decisions faster. Then, they can alert their customers as soon as possible which helps to reduce support calls and increase overall customer satisfaction.

Reacting in real-time to unforeseeable obstacles

Unfortunately, there will also be occasions in which supply chain disruptions simply can’t be anticipated. You may have seen recent headlines of the attacks by Houthi rebels in Yemen on container vessels in the Bab al-Mandeb, a strait that connects the Red Sea to the Gulf of Aden and the Indian Ocean. Meanwhile, November 2023’s cyberattacks on Australian shipping ports offers another example of unpredictable events faced by organisations.

These crises underscore the importance of visibility, agility, flexibility, and resilience, all of which are powered by advanced supply chain technology. Simple location tracking of vessels is no longer sufficient; today, you need to be able to visualise which shipments and orders on which vessels are impacted by disruptions, plan a safe alternative route, and view and transmit an updated ETA to customers.

Let’s use the conflict in the Red Sea as an example. Businesses using a high-velocity platform not only benefit from real-time insights into vessels affected. They can also adapt their inventory management and downstream planning to limit stock outs. Improve operational efficiency by rerouting shipments to avoid putting vessels in danger and strategize on the most effective new shipping lines to use. Minimise costs by identifying and mitigating penalties and fees that occur because of upstream disruption. And, perhaps most importantly, boost customer satisfaction with transparent, proactive communication on delays to reset delivery expectations.

The importance of faster, more informed decision-making

Numerous recent supply chain disruptions have become global news stories. However, their publicity doesn’t always mean that customers will be any more sympathetic if goods are delayed, and regularly late deliveries can damage brand reputations. Organisations must harness competitive advantages—such as intelligent supply chain software—to stand out from the crowd and provide exceptional customer experiences. From avoiding any added costs that are usually passed on to customers to ensuring that goods arrive as soon as possible, the world’s leading shippers, carriers, and LSPs are now using advanced digital tools to transform supply chain operations from a cost centre to a revenue generator.

Ultimately, supply chains are never ‘normal’. Extreme weather events, unforeseeable geopolitical disruptions, and rapid technological evolutions mean organisations may never be able to expect their logistical operations to work smoothly every day. Instead, wielding all the available intelligence tools now at their disposal is the closest they can get to a frictionless, straightforward supply chain—and consistently delighted customers.

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Industry View: Secure Your Supply Chain Now to Beat Disruption

 

More Turmoil for Shipping?

Posted on by David Priestman

Geopolitical upheaval and legislative change: More turmoil for shipping ahead.

There’s no such thing as a typical week for shipping. Global routes form a delicate web, and disruption is to be expected. From inclement weather to economic headwinds, disruption rarely makes global headlines, as contingency planning by shippers and carriers usually shields consumers from its effects. Notable exceptions include the period following COVID-19 lockdowns, when the whole globe felt the impact of port congestion and skyrocketing shipping costs. Recent events appear similarly momentous, putting global shipping in a precarious position and highlighting endemic issues.

When lightning doesn’t just strike once

Rather than a single lightning strike, current shipping disruption can be attributed to a barrage of unforeseen geopolitical and climatic developments. Currently, attacks by Houthi rebels are disrupting shipping in the Suez Canal, which usually accommodates roughly 12% of annual world trade and 30% of all global container traffic. Meanwhile, across the globe, an ongoing drought in the Panama Canal continues to restrict shipping capacity.

The result? Shippers are experiencing significant delays, and freight costs are skyrocketing again. For example, Transporeon data shows that container shipping prices from Asia to Europe have recently spiked by 300%. And with no end to disruption in sight, this may just be the start! But geopolitical upheaval is just one of many sources of disruption facing the European maritime transportation sector, with two important legislative changes coming into force.

Introducing the EU Emissions Trading Scheme

Designed to reduce shipping emissions by encouraging carriers to invest in sustainably-fuelled vessels, the EU Emission Trading Scheme (ETS) came into force at the start of 2024. Shipping companies are now obliged to buy permits for a portion of their emissions (gradually increasing to 100% by 2027) for all inbound, outbound and transhipment vessel movements. LNG and other ‘sustainable’ fuels are exempt from EU ETS. However, these are currently used in less than 1% of maritime transportation, and it’s likely to take decades to build capacity. So, in the short term, most carriers will view EU ETS as a ‘cost of doing business’. An extra ‘ETS/fuel surcharge’ will most likely be passed onto shippers.

The end of CBER

In April, the EU will make another significant legislative change by discontinuing the 2009 Consortia Block Exemption Regulation (CBER), which allowed shipping companies to cooperate in consortia. CBER was introduced to improve service availability and market options for shippers, intended to drive down the price of maritime transportation. However, the pandemic exposed its flaws (limited oversight and information-sharing), which allowed larger carriers to consolidate and potentially exploit loopholes. This led to higher prices and reduced service options for shippers – and ultimately to the exemption’s demise.

The full implications of ending CBER aren’t clear yet. Shipping consortia will need to carefully assess whether their current cooperation agreements are compatible with general EU antitrust rules when offering joint services or sharing slots, capacity and data. However, some speculate that we could see reduced competition (and therefore capacity). Container shipping is very capital-intensive, and there’s a high barrier for carriers to add new services to a line, particularly when collaboration is limited. However, there’s also a clear expansion opportunity for carriers who already have a strong market position.

If disruption is a given, how can shippers prepare?

Ask any shipper, and they’ll tell you that delays aren’t always inherently problematic. However, a mismatch between their expectations (i.e. the timely arrival of cargo) and reality (i.e. delays) can have serious repercussions in the form of resource misallocation and unnecessary costs. These are ultimately passed onto consumers when problems stack up – so everyone loses.

Unfortunately, ‘unexpected’ delays are far too common in maritime transportation. The problem isn’t that delays happen ‘too suddenly’ for shippers to act, but that there’s a lack of information-sharing within the industry. Shippers routinely lack regular updates on the status of their freight, and if freight has been booked via a third party, tracking information is often completely unavailable.
Maritime transportation suffers from endemic data fragmentation. For instance, to track freight, shippers currently have to ‘call’ different carriers’ APIs individually for each vessel. The technology to fix this problem already exists. In recent years, it has been widely implemented across other transportation modes – to the point where real-time visibility is now becoming standard practice for road freight.

In maritime transportation, the key to minimising disruption lies in increasing cross-industry collaboration and boosting the data maturity of shippers and carriers. Ideally, early impact identification and analysis require shippers to have access to a single source of truth with data from all carriers. Though data fragmentation can’t be fixed overnight, shippers can already implement technologies that offer improved visibility into the location of freight and enable them to predict where future disruption might occur. The bottom line? Shippers can’t control the climate. Or geopolitics. Or legislative changes. But they can control how they respond to disruption.

by Lena von Fritschen, Director Market Intelligence at Transporeon, a Trimble Company.

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Industry View: Secure Your Supply Chain Now to Beat Disruption

 

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