It is reported that the waters off Maine’s coast have been warming faster than almost any other ocean on the globe due to global warming. Lobstermen, many of whom have families with generations in this industry, are seeing the rate of lobster eggs decreasing, thus moving lobster activity farther north. Some studies report that the population of lobsters off of Maine’s coast has dropped by as much as 40 percent, which is severely restricting the supply of lobsters and affecting people’s livelihood. Warming oceans are also affecting other types of fishing industry, thus affecting the food chain.
In 2017, Hurricane Maria struck the island of Dominica in the Caribbean, wiping out thousands of coconut trees, which is a major food and oil source on the island, causing a major coconut oil producer stop production. While officials and businesspeople contemplated importing coconuts and coconut trees to replace the supply chain disruption, it was decided that the risk of importing foreign coconut diseases was too high.
These are just two examples of how climate change is increasingly affecting supply chains, and thus global trade. I have been tracking these effects for several years. Some are subtle, and some are glaringly obvious. However, I could not believe the latest example, which involves the Panama Canal. According to the International Monetary Fund’s blog, titled, “Climate Change is Disrupting Global Trade,” Panama has been experiencing a drought as of late. This has been affecting the water levels in Gatún Lake, which feeds the Panama Canal. According to the blog, approximately 1,000 ships utilize the Panama Canal each month, representing more than 40 million tons of goods. This represents 5 percent of total global maritime trade volumes.
The drought, the worst in the canal’s 143 years of service, resulted in a reduced tonnage of 15 million this year (about 5 percent), and has increased the time to pass through the canal by six additional days. On average, about 36 ships pass through the canal on a daily basis. It is predicted that by February 2024, this total will drop by half to 18 ships per day. Needless to say, this drought, which is attributed to climate change, is not only having effects in North and South America, but also in Asia and Europe. Who would have thought that the rainy Central American country of Panama would have a drought that is affecting global trade?
It is evident that supply chains will be affected by more and more disruptions caused by climate change. According to the World Trade Organization’s publication, “The resilience of trade in the face of increasingly frequent natural disasters,” the reporting of natural disasters increased by an average of 73 percent per decade from the 1950s through the 2000’s. The number of natural disasters recorded in the last decade (3,718) was almost four times the number reported in the 1970s.
The United Nations’ Intergovernmental Panel on Climate Change reported that during the past six decades, more than 56 percent of carbon dioxide emissions resulting from human activity have been absorbed annually by the land and oceans. Sea levels rose by about 1.3 millimeters per year between 1901 and 1971. They rose by 3.7 millimeters per year between 2006 and 2018. The panel states that these factors are contributing to extreme weather conditions such as droughts, tropical cyclones, heatwaves, and heavy precipitation in some areas.
Higher temperatures are melting ice in the Arctic, which ironically is making passage for ships using the Arctic seaways easier. This could result in reduced shipping distances, which may help to offset the problems being experienced at the Panama Canal. Whether this will completely revamp the way that companies set up their logistics chains remains to be seen.
The job of supply chain managers is becoming more and more difficult due to climate change. Managers now have to deal with more natural disasters, some that can come quickly, one after the other, which can cause severe supply chain disruptions. They also have to develop Plans B and C, or alternative ways to get products and supplies to production plants, distribution centers, and consumers. Supply chain disruptions will cause limited supplies of products at retail outlets where the end consumer shops, and will result in higher prices, which exacerbates inflation.
I am convinced that while countries around world squabble and delay about what steps must be taken, more and more problems caused by climate effect on global trade will increase. The data strongly proves this.