Disclaimer: The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of WERC.
The Panama Canal was officially opened in 1914, after decades of planning and construction (the U.S. completed a major takeover and rebuilding after earlier French efforts failed). Its purpose was to link the Atlantic and Pacific oceans across the Isthmus of Panama, greatly shortening shipping routes that otherwise had to go around Cape Horn or through the southern tip of South America. It transformed global trade by allowing much faster and more economical movement of goods.
The Suez Canal was built between 1859 and 1869, opening on 17 November 1869 under the supervision of Ferdinand de Lesseps, among others. It cuts across the Isthmus of Suez in Egypt, connecting the Mediterranean Sea with the Red Sea. It eliminated the need to sail around Africa’s Cape of Good Hope for trade between Europe and Asia, massively reducing distance, time, and cost.
Why They Matter for Container Traffic and Household Goods
- Both canals are chokepoints: major arteries in global supply chains for all kinds of goods, including consumer and household items. Containers carrying furniture, electronics, clothing, perishable food, etc., often pass through these canals.
- Shipping via canal reduces transit time, fuel costs, and hence freight costs, compared with longer alternative routes.
- Reliability (predictability of timing) is very valuable for retailers, manufacturers, and downstream consumers.
Current Issues Affecting the Flow of Container Traffic
Both canals are under stress, but from different causes. Here are the key issues:
Panama Canal
Drought and Water Levels – Recent droughts, associated in part with El Niño weather patterns, have driven water levels in Lake Gatún (and other reservoirs feeding the locks) very low. This forces the Panama Canal Authority (PCA) to impose limitations on how many ships can transit per day, to reduce the depth (“draft”) allowed for vessels, and in some cases, reduce cargo loads (so ships ride higher).
Reduced Transit Capacity and Queueing – Because fewer transits are possible per day (due to conservation of water), queues of ships build up. In August 2023, there were over 150 vessels waiting, with wait times up to 21 days at times.
Restrictions on Ship Load/Drafts – To cope, ships have to reduce weight or be restricted in their draft (depth) to lower water use by locks. That means not filling to full capacity.
Operational Adjustments – New booking/reservation systems, prioritizing larger ships (so that fewer transits carry more containers), water recapture in the newer “Neo‑Panamax” locks, and potential infrastructure investments (e.g., new reservoirs) are part of the response.
Suez Canal
Geopolitical and Security Risks – Ships transiting the Suez are exposed to risk from regional instability, particularly attacks in the Red Sea/Bab al‑Mandab Strait by Houthi rebels based in Yemen. Insurance costs, perceived danger, risk to crew, and delays have increased. Some ships avoid the Suez altogether and take the much longer route around southern Africa.
Blockages and Accidents – The canal has seen occasional grounding/blockage incidents (notably the “Ever Given” in 2021). Even when not catastrophic, accidents or delays cost time and require tug/rescue operations.
Traffic Drop and Revenue Pressures – Because of both risk and diversion of vessels, Suez traffic has dropped in certain periods. That hurts revenue for Egypt, increases cost per transit (or leads to discounts to try to attract traffic back), and raises uncertainty. For example, in 2025, the Suez Canal Authority offered a 15% discount for large container ships to win back traffic and offset high insurance costs.
Impacts on Timing, Pricing, and Safety for Household Goods
Timing/Delays – Delays in transit or rerouting (for example, having to go around Africa instead of via Suez) can add many days to shipping time. The Panama Canal queues have, in some cases, resulted in two- to three-week delays. Suez route avoidance also adds extra transit days. These delays cascade: retailers need longer lead times; stock‑outs are more likely; and production schedules may be disrupted.
Pricing/Cost Increases – Higher insurance, fuel, labor, and opportunity costs occur when routes are longer or when delays are deep. In Panama, ships may not carry full loads → increased per‑unit shipping cost. Also, high demand for limited booking slots drives up fees (in some cases, vessels pay more to get priority). In Suez, higher risk translates into higher insurance premiums, sometimes surcharges, plus sometimes toll discounts by canal authorities to retain traffic (which in itself indicates pressure).
Safety/Risk to Goods – Longer sea journeys increase the risk of damage (due to more handling, weather exposure, piracy or security threats). Cold chain or perishable items are particularly vulnerable. Also, delays expose goods to risks like spoilage, theft, or delays in meeting regulatory/customs time windows. Security threats around Suez/Red Sea/Bab al‑Mandab can endanger crew and cargo.
What Is Being Done, and What’s Coming
Panama Canal:
- The PCA has been improving its booking system to give more predictability.
- Water conservation measures: using newer locks that recapture water (Neo‑Panamax locks), limiting nonessential transits, and regulating draft.
- Planning and/or building new freshwater reservoirs to increase capacity and stabilize water supply. For example, a proposed reservoir on the Indio River is intended to serve both canal operations and Panama City water needs.
- As of 2025, traffic through Panama is rebounding, especially for Neo‑Sub‑Panamax (mid-large) container ships.
Suez Canal:
- The Egyptian authorities have expanded capacity in recent years (2015 upgrade).
- In 2025, offering discounts (15%) for large container ships (130,000 metric tons or more) for a limited time, to encourage shipping lines back and offset the higher insurance/risk premiums.
- Efforts to improve security in the Red Sea/Bab al‑Mandab Strait so that shipping through Suez is viewed as safer. That includes diplomatic, naval escort, or other measures.
Future Outlook
Climate Change and Weather Variability – For Panama especially, future droughts are a serious concern. El Niño/other climate patterns may become more frequent or intense. Water scarcity could remain the bottleneck unless infrastructure (reservoirs) and operational changes keep pace.
Route Diversification – Some companies may increasingly shift routes to avoid risk or congestion: for example, using alternate canals, “land bridges” (unload container, move by land/train, reload), or even longer sea routes. That will raise shipping costs globally, possibly passed down to consumers.
Technological/Operational Improvements – Improvements in canal traffic management, better forecasting, optimizing which vessels transit (making more use of larger vessels to maximize container per transit), improving water management, dredging, bank maintenance, perhaps automation or digital systems to speed up canal passage, safety inspections, etc.
Security and Geopolitical Stability – For Suez to regain or maintain full usage, risks in the surrounding region need mitigation. If attacks or instability persist, the cost for insurance, delays, and risk will continue.
Economic and Policy Incentives – Canal fees, discount schemes, and regulatory policies will matter. Governments (i.e., Panama, Egypt) have incentives to keep their canals flowing as smoothly as possible because of revenue and geopolitical importance.
Conclusion
The Panama and Suez canals remain two of the most vital arteries in global trade, especially for containerized consumer and household goods. However, they face growing challenges: for Panama, environmental/climate-driven water shortages that limit capacity; for Suez, geopolitical and security risks that force rerouting or impose higher risk costs. These challenges translate into longer transit times, raised shipping costs, and increased risk to goods.
But things are being done: Canal authorities are adapting operations, investing in infrastructure, offering incentives, and trying to reduce uncertainty. The future will likely hinge on balancing climate resilience, managing geopolitical risk, and maintaining competitiveness so that both canals can continue to support global supply chains reliably.