Climate change and waterways: A growing threat to global supply chains

Last updated:
Nov 21, 2022

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Climate change is threatening the viability of the world’s waterways. Droughts along arterial rivers such as the Danube, Mississippi, Rhine and Yangtze have had severe consequences for global supply chains, as well as knock on political and environmental effects.

In 2021, 524 million tonnes of freight were transported on European waterways, amounting to 17% of all bulk goods cargo. The majority of this was raw materials, namely food and fuel, both of which are seeing price inflation already due to the war in Ukraine and other supply chain shocks; adding increasing political pressure to the viability of these routes. In recent years Western governments have invested heavily into water freight infrastructure as it is three to four times more energy efficient than road transportation, and forms a key part of net-zero emissions strategies. However, not only are waterways a useful tool in the fight against climate change, the very effects of global warming are reducing its reliability.

For example, abnormally high temperatures have lowered water levels on the Mississippi river, forcing barges to reduce their capacity or stop altogether to prevent them from running aground. The Mississippi is a critical link in the US’ supply chain, carrying over half of all grain exports, and providing the main route for fertiliser and fuel for farms upriver. This is particularly concerning for other countries relying on these commodities such as Mexico, who have historically struggled with food insecurity, and imported $6.7 billion of cereals from the US in 2021.

This effect is amplified at globally important strategic canals; 12% of global trade passes through the Suez Canal alone. In March 2021, the canal was blocked for six days when the Ever Given, one of the world’s largest container ships, ran aground. The incident was attributed to a combination of dust storms and 40mph winds. Both factors were exacerbated by climate change, as near record breaking temperatures of 44°C in the days prior dried the surrounding soil and increased the severity of the storm. Lloyd’s list, a maritime intelligence company, estimated that the incident held up $9.6 billion of goods per day, resulting in an assessed cost to reinsurers of over $2 billion in total. With container ships continuing to grow in size and extreme weather events becoming more frequent, costlier incidents become more likely as climate change progresses.  

Overall, waterways will highly likely remain an integral part of emissions control and resource security strategies. Together, these case studies demonstrate that climate related risks will almost certainly continue to have cascading impacts on global supply chains, and highlight to businesses the importance of planning against them.

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