TL;DR:
- New Zealand faces shipping delays on key routes due to conflicts in the Red Sea and drought-induced disruptions in the Panama Canal.
- The Suez Canal rerouting and Panama Canal’s reduced capacity are expected to exacerbate delays during New Zealand’s peak export season to Europe.
- These disruptions could lead to increased transport costs, cancelled export orders, and higher prices for imported goods in New Zealand.
The Ministry of Foreign Affairs and Trade (MFAT) has issued a warning about potential shipping delays affecting New Zealand’s peak export season, particularly on two crucial trade routes. According to a recent report, ongoing conflict in the Red Sea and drought conditions impacting the Panama Canal are already causing significant disruptions for exporters.
These include increased transportation costs, and in some instances, cancelled export orders. The situation is anticipated to deteriorate further as New Zealand enters its primary exporting window to Europe between April and May.
The report details how attacks by Iranian Houthi rebels on commercial vessels in the Red Sea have led shipping companies to avoid the Suez Canal, a vital link between Europe and New Zealand. This has forced ships to navigate around Africa, extending the journey by 40% and resulting in delays ranging from two to five weeks. Consequently, trade volumes through the Suez Canal have plummeted by 40% as vessels rerouted to avoid the conflict zone.
On the other side of the globe, the Panama Canal is grappling with capacity constraints due to low water levels caused by drought, allowing only 24 ships to pass per day, down from the usual 36. This canal is integral for trade between the Indo-Pacific and Europe, handling 7% of the world’s seaborne trade.
The largest Panamax and Neo Panamax container ships are most affected by the canal’s draft restrictions, although some New Zealand exporters have managed to circumvent these limitations by chartering smaller vessels.
The disruptions not only impacted New Zealand’s exports but also its imports from Europe, the United Kingdom, and North Africa, which amounted to $7.7 billion and $15.7 billion, respectively, in the year to September 2023.
Key imports such as machinery, vehicles, retail medicines, vaccines, and fertiliser from North Africa could face delays. Consequently, New Zealand households and businesses might experience price increases for some imported goods due to these global shipping challenges.
