How Climate Extremes are Hammering Supply Chains

Hurricane Hilary will be a disruption for critical products, including food – and even a short lived disruption can have longer term effects.
There are other critical choke points that are also vulnerable to a changing climate.

Giant Freaking Robot:

In what is being called the “world’s worst traffic jam,” some 200 cargo ships are waiting to pass at the Panama Canal as, thanks to global climate change, the area experiences its worst drought in 100 years. As Futurism reports, the huge backlog has been growing for some time and might not get any better for a few weeks yet. The human-made passageway is famous not only as one of the world’s most impressive feats of engineering but as one of the most important trade routes on Earth.

In what is being called the “world’s worst traffic jam,” some 200 cargo ships are waiting to pass at the Panama Canal as the area experienced its worst drought in 100 years. pic.twitter.com/SHh6wa8muF

— Massimo (@Rainmaker1973) August 20, 2023

The Panama Canal relies on massive amounts of water, the supply of which is shrinking in the current drought. As climate change continues across the globe, extreme weather events and conditions such as droughts, floods, and hurricanes are also increasing in both frequency and intensity. In fact, this is not the first time in recent history the canal has been struck by water shortages.

Drought at the Panama Canal has not been a common sight over much of the past century, but climate change is altering that reality and trading it for one that is much less desirable—and much more expensive. As recently as 2019, similar conditions to the current dry spell have hit Panama, which is normally one of the world’s wettest areas. Before that, the area was also similarly parched in 2016, with each event getting worse than the one before.

All of this comprises weather conditions that have been rare for the Panama Canal in past decades, with the most recent drought of the current severity dating back a century. As the global climate changes, though, conditions like this continue to worsen. The current backlog of some 200 vessels is already causing a ripple effect that will impact businesses, homes, and communities that rely on the supplies and products that come through the waterway every day.

The Panama Canal is 50 miles long and is supplied with water by local rainfall, meaning that a lack of precipitation forces canal authorities to reduce the amount of water usage by slowing the flow of traffic. 

The canal uses locks at each of its ends that fill with water to lift ships from the ocean water level up to the level of the artificial Gatun Lake, 85 feet above sea level, then lower them back down to sea level at the other end. This process requires huge amounts of water, which is now in shorter supply due to climate change.

North Carolina State University

Major supply chain disruptions due to weather-related incidents are on the rise, and one can’t dismiss these as a “once-in-a-century” event any more.  The Texas freeze and Hurricane Ida severely disrupted petrochemical production, which had a ripple effect on the supply of resins and plastics, which is used in many different types of resins and plastics (think of impact on pallet shrink wrap), as well as toys (which use both plastic AND semiconductor chips), consumer goods packaging, and many, many countless other areas of industrial production that rely on PVC, citric acid and carbon dioxide, (used in soda drinks), nitrogen, and other process chemicals. (I was wondering why there were empty shelves of Gatorade Zero, my favorite drink!)

The Texas freeze and the power outages brought the world’s largest petrochemical complex to a standstill, forcing more plants in the Gulf of Mexico region to shut down than during Hurricane Harvey in 2017. A month later (March), many remained offline, and analysts said it could be months more before all are fully back. Prices for polyethylene, polypropylene and other chemical compounds used to make auto parts, computers, and a vast array of plastic products, have reached their highest levels in years in the U.S. as supplies tighten. For example, prices for polyvinyl chloride, or PVC, have more than doubled since last summer, according to S&P Global Platts. The shortages in PVC and other materials are even shutting down automotive production lines, as well as other manufacturers that I’ve been speaking with.  However, worse was to come.  Hurricane Ida struck the Gulf coast, and knocked out more than 60% of America’s PVC production offline.  U.S. Gulf Coast export PVC prices were assessed at $1,900 a metric tonne for the week of Sept. 10, up 28% since the beginning of the year.  Other petrochemicals such as ethane, a byproduct of natural gas and a key feedstock, is also up 25% in September, and is the highest it has been in three years.  Farming has also suffered from record heat and droughts this past year, and it is unclear if this is a short-term problem.  Many tree crops in California have been impacted including almonds, peaches, citrus, avocados, and other fruits and nuts, and California’s agricultural heartland is projected to lose more than a 10^th of its acreage by 2040. A resins expert in Houston shared with me the following insights last week:

We are through the impact of the freeze – and the LS Force Majeure clauses finally ended, but not until September!  This event resulted in damaged to a lot of pipes that were not weatherized for a frozen winter storm.  Ida had a much more narrow impact, as it was targeted, and the major damage done from Ida was substantial for PVC.  Ida hit the heart of PVC production sites, and took out 60% of US production.  That is just coming back on line now.  Resins was a market that was just getting to the point of being balanced with demand following COVID, but continues to experience record high pricing, and difficulty in sourcing.  We are also seeing difficulty for sourcing upstream PVC chemicals like chlorine and caustic soda, and there are a lot of buyers out there for those materials.  Polyethylene and polypropylene are at the crest of their rollercoaster ride.  However, we are leery.  Just when we thought things were good, something happened to disrupt the situation – and if we have another big storm, we will be in trouble again.