Tomi Solakivi: Maritime choke points controlling the global logistics chains

The global shipping market, responsible for over 80% of international trade has for centuries been the backbone of the world trade, providing a reliable and cost-effective mode of transport for the goods. Already in the 17th century, Hugo Grotius presented the idea of Mare Liberum or freedom of the seas, acknowledging the importance of free movement of goods for the global trade. To guarantee the undisturbed flow of goods, the international community has for long worked for a global regulatory framework. Preceded by the Convention on the High Seas, the United Nations Convention on Law of the Seas guarantees the world commercial shipping the freedom of the seas in high seas, and rights for innocent and safe passage also on the territorial waters and exclusive economic zones under the jurisdiction of nation-states. 

During the recent years, however, the free flow of goods on the seas has become increasingly disturbed, for various reasons. In March 2021, container vessel Ever Given ran aground at the Suez Canal, blocking this important transit route of the Europe-Asia -trade for six days, causing delays in delivery and interrupting supply networks globally. Since October 2023, the traffic through the Red Sea has been disturbed by Houthi rebels from Yemen, who have constantly been attacking transiting commercial vessels, causing as much as 60% of the traffic to reroute around the Cape of Good Hope. For the vessels and the goods they transport, this corresponds to as much as 60% more time consumed on a Europe-Asia journey, with corresponding increases in fuel consumption, costs and loss of earnings potential. 

In 2024, the Panama Canal authorities were forced to limit the traffic through the canal due to environmental reasons. The lock system of the Canal is mostly operated by supplying water from Gatún lake, a reservoir that is filled with rainwater. Due to a prolonged drought and low amounts of rain, the supply of water has been insufficient to maintain the desired level of operations, causing delays and rerouting of vessels. In case of the Panama Canal, the alternative is just as challenging as in the case of Suez Canal – the only alternative route from Atlantic to the Pacific Ocean is around South America. The transit volumes of the canal have since recovered, but considering the advancing climate change, further difficulties are likely to emerge during the coming years. 

Finally, geopolitics has also entered the discussion. After his election, Donald Trump initiated a discussion, suggesting that the Panama Canal should be in the control of the US, to secure the flow of American goods and equipment. In Europe, an example of smaller scale on the importance of controlling passages has been demonstrated for a while. Since occupying Crimea, Russia disturbed the traffic, especially Ukrainian, to and from the Sea of Azov by limiting the size of the vessels and by organizing vessel checks delaying the transports. 

Securing safe, fast and undisturbed movement of goods is crucial for various reasons. For individual companies and supply chains, it is a matter of competitiveness. For a long time, supply chains have been accustomed to a seamless flow of goods, emphasizing “lean” approach, scale economies of centralized production, global sourcing and reduction of inventories. The Covid-19 pandemic was one of the first wakeup calls for the supply chains to consider the vulnerability of their strategies, as lockdowns reduced the throughput of key nodes, causing product and component shortages and ultimately reduction of production in many key industries.    

For the land-based modes, the dense network of roads and railways usually provide a viable alternative in case a route is cut out for some reason. For shipping, however, the situation is in practice different. Even if vessels are able to navigate freely on the high seas, a large share of the volumes transit through a small number of narrow straits and canals. For example, 30% of world container volumes transit through strait of Malacca, and the strait of Hormuz is of similar importance to world oil trade. Even a minor disruption in either of them is instantly seen not just in the shipping market, but more widely in the world economy. The recent years have shown that these, along with a handful of other chokepoints of world maritime trade. For example, for a shipment to reach Central Europe from Asia, the normal route passes through East China Sea, South China Sea, Strait of Malacca, Strait of Bab el Mandeb, Suez Canal and Gibraltar. A disturbance in any of these chokepoints will lead at least into delay, in many cases rerouting of transport. In case of a shipment destined to the Baltic Sea, two additional chokepoints, the English Channel and the Danish Straits can be added to the list. 

For the supply chains, as well as for the national security of supply, this means that the control is slipping further away from home base. The distant chokepoints are away from national governance, giving limited possibilities to keep them open in case of disruption. In some cases, blocking a chokepoint means in practice that the entire transport lane is closed, and accessibility to entire regions might be in jeopardy. Just as an example, the entire Baltic Sea is dependent on the openness of the Danish Straits – with maritime volumes in such a scale that modal shift would not be a possibility. 

As this is the case, the only alternative is to refine supply chain strategies. For a long time, the motivation behind multiple sourcing, a procurement strategy to obtain services from multiple, rather than single supplier, has been mainly motivated by the potential of a supplier being unable to deliver as agreed. In today’s world, the “default risk” of the transport route should emphasized increasingly in the sourcing strategies. Considering the complexities of the world trade, this most likely means also increased nearshoring bringing more of the sourcing closer, behind less chokepoints, for transport chains to be more controllable, and with more alternatives to adjust if needed. 

During the recent years, the geopolitical situation has to some extent driven the world towards “friendshoring”, referring to a phenomenon that countries are increasingly trading with trade partners sharing similar political views, consequently reducing trade between the political blocks.  Similar approach could be discussed in transport and shipping context as well, considering whether the chokepoints are under friendly control or not. Some recent political comments signal that this kind of discussion is likely to take off also in the West. However, for example China has taken this kind of approach already for a long time with its Belt and Road initiative, with a stated purpose to build and maintain alternative transport corridors for its foreign trade. Because of this, for example the Arctic has gotten increase interest, as the Northeast and Northwest Passages, and most likely in the coming decades also the Transpolar Route, are considered increasingly viable alternatives for the traditional main shipping lanes. 

All of this requires increased knowledge and understanding of the complex and interconnected situation. For the supply chains of the 21st century to be able to be resilient, a deeper knowledge on factors impacting the chokepoints of the world trade. As these include themes from climate change to geopolitics, it is by no means an easy task. At the same time, the ones responsible for security of supply should have a detailed understanding on the supply chains often opaque for the outsiders. This requires both interdisciplinary collaboration, as well as a new mindset, where new themes such as resilience are emphasized.