More stories

  • in

    Baltimore Bridge Collapse Creates Upheaval at Largest U.S. Port for Car Trade

    The Baltimore bridge disaster on Tuesday upended operations at one of the nation’s busiest ports, with disruptions likely to be felt for weeks by companies shipping goods in and out of the country — and possibly by consumers as well.The upheaval will be especially notable for auto makers and coal producers for whom Baltimore has become one of the most vital shipping destinations in the United States.As officials began to investigate why a nearly 1,000-foot cargo ship ran into the Francis Scott Key Bridge in the middle of the night, companies that transport goods to suppliers and stores scrambled to get trucks to the other East Coast ports receiving goods diverted from Baltimore. Ships sat idle elsewhere, unsure where and when to dock.“It’s going to cause a lot of chaos,” said Paul Brashier, vice president for drayage and intermodal at ITS Logistics.The closure of the Port of Baltimore is the latest hit to global supply chains, which have been strained by monthslong crises at the Panama Canal, which has had to slash traffic because of low water levels; and the Suez Canal, which shipping companies are avoiding because of attacks by the Houthis on vessels in the Red Sea.The auto industry now faces new supply headaches.Last year, 570,000 vehicles were imported through Baltimore, according to Sina Golara, an assistant professor of supply chain management at Georgia State University. “That’s a huge amount,” he said, equivalent to nearly a quarter of the current inventory of new cars in the United States.Baltimore Ranks in the Top 20 U.S. PortsTotal trade in 2021 in millions of tons

    Source: Bureau of Transportation StatisticsElla KoezeWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • in

    Why the Panama Canal Didn’t Lose Money When Ship Crossings Fell

    A water shortage forced officials to reduce traffic, but higher fees increased revenue.Low water levels have forced officials to slash the number of ships that are allowed through the Panama Canal, disrupting global supply chains and pushing up transportation costs.But, remarkably, the big drop in ship traffic has not — at least so far — led to a financial crunch for the canal, which passes on much of its toll revenue to Panama’s government.That’s because the canal authority introduced hefty increases in tolls before the water crisis started. In addition, shipping companies have been willing to pay large sums in special auctions to secure one of the reduced number of crossings.In the 12 months through September, the canal’s revenue rose 15 percent, to nearly $5 billion, even though the tonnage shipped through the canal fell 1.5 percent.The Panama Canal Authority declined to say how much money it earned from auctions. At a maritime conference last week in Stamford, Conn., Ilya Espino de Marotta, the canal’s deputy administrator, said the auction fees, which reached as much as $4 million per passage last year, “helped a little bit.”But even now, during a quieter season for global shipping, auction fees can double the cost of using the canal. This month, Avance Gas, which ships liquefied petroleum gas, paid a $401,000 auction fee and $400,000 for the regular toll, said Oystein Kalleklev, the company’s chief executive. Auction fees are ultimately borne by the company whose goods are being shipped.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • in

    New Freighters Could Ease Red Sea Cargo Disruptions

    Analysts and shipping executives say they expect costs to fall later this year as companies receive vessels they ordered two to three years ago.After the Houthi militia started attacking container ships in the Red Sea last year, the cost of shipping goods from Asia soared by over 300 percent, prompting fears that supply chain disruptions might once again roil the global economy.The Houthis, who are backed by Iran and control northern Yemen, continue to threaten ships, forcing many to take a much longer route around Africa’s southern tip. But there are signs that the world will probably avoid a drawn-out shipping crisis.One reason for the optimism is that a huge number of container ships, ordered two to three years ago, are entering service. Those extra vessels are expected to help shipping companies maintain regular service as their ships travel longer distances. The companies ordered the ships when the extraordinary surge in world trade that occurred during the pandemic created enormous demand for their services.“There’s a lot of available capacity out there, in ports and ships and containers,” said Brian Whitlock, a senior director and analyst at Gartner, a research firm that specializes in logistics.Shipping costs remain elevated, but some analysts expect the robust supply of new ships to push down rates later this year.Before the attacks, ships from Asia would traverse the Red Sea and the Suez Canal, which typically handles an estimated 30 percent of global container traffic, to reach European ports. Now, most go around the Cape of Good Hope, making those trips 20 to 30 percent longer, increasing fuel use and crew costs.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • in

    Red Sea Shipping Halt Is Latest Risk to Global Economy

    Next year could see increasing volatility as persistent military conflicts and economic uncertainty influence voting in national elections across the globe.The attacks on crucial shipping traffic in the Red Sea straits by a determined band of militants in Yemen — a spillover from the Israeli-Hamas war in Gaza — is injecting a new dose of instability into a world economy already struggling with mounting geopolitical tensions.The risk of escalating conflict in the Middle East is the latest in a string of unpredictable crises, including the Covid-19 pandemic and the war in Ukraine, that have landed like swipes of a bear claw on the global economy, smacking it off course and leaving scars.As if that weren’t enough, more volatility lies ahead in the form of a wave of national elections whose repercussions could be deep and long. More than two billion people in roughly 50 countries, including India, Indonesia, Mexico, South Africa, the United States and the 27 nations of the European Parliament, will head to the polls. Altogether, participants in 2024’s elections olympiad account for 60 percent of the world’s economic output.In robust democracies, elections are taking place as mistrust in government is rising, electorates are bitterly divided and there is a profound and abiding anxiety over economic prospects.A ship crossing the Suez Canal toward the Red Sea. Attacks on the Red Sea have pushed up freight and insurance rates.Mohamed Hossam/EPA, via ShutterstockA billboard promoting presidential elections in Russia, which will take place in March.Dmitri Lovetsky/Associated PressEven in countries where elections are neither free nor fair, leaders are sensitive to the economy’s health. President Vladimir V. Putin’s decision this fall to require exporters to convert foreign currency into rubles was probably done with an eye on propping up the ruble and tamping down prices in the run-up to Russia’s presidential elections in March.The winners will determine crucial policy decisions affecting factory subsidies, tax breaks, technology transfers, the development of artificial intelligence, regulatory controls, trade barriers, investments, debt relief and the energy transition.A rash of electoral victories that carry angry populists into power could push governments toward tighter control of trade, foreign investment and immigration. Such policies, said Diane Coyle, a professor of public policy at the University of Cambridge, could tip the global economy into “a very different world than the one that we have been used to.”In many places, skepticism about globalization has been fueled by stagnant incomes, declining standards of living and growing inequality. Nonetheless, Ms. Coyle said, “a world of shrinking trade is a world of shrinking income.”And that raises the possibility of a “vicious cycle,” because the election of right-wing nationalists is likely to further weaken global growth and bruise economic fortunes, she warned.A campaign rally for former President Donald J. Trump in New Hampshire in December.Doug Mills/The New York TimesA line of migrants on their way to a Border Patrol processing center at the U.S.-Mexico border. Immigration will be a hot topic in upcoming elections.Rebecca Noble for The New York TimesMany economists have compared recent economic events to those of the 1970s, but the decade that Ms. Coyle said came to mind was the 1930s, when political upheavals and financial imbalances “played out into populism and declining trade and then extreme politics.”The biggest election next year is in India. Currently the world’s fastest-growing economy, it is jockeying to compete with China as the world’s manufacturing hub. Taiwan’s presidential election in January has the potential to ratchet up tensions between the United States and China. In Mexico, the vote will affect the government’s approach to energy and foreign investment. And a new president in Indonesia could shift policies on critical minerals like nickel.The U.S. presidential election, of course, will be the most significant by far for the world economy. The approaching contest is already affecting decision-making. Last week, Washington and Brussels agreed to suspend tariffs on European steel and aluminum and on American whiskey and motorcycles until after the election.The deal enables President Biden to appear to take a tough stance on trade deals as he battles for votes. Former President Donald J. Trump, the likely Republican candidate, has championed protectionist trade policies and proposed slapping a 10 percent tariff on all goods coming into the United States — a combative move that would inevitably lead other countries to retaliate.Mr. Trump, who has echoed authoritarian leaders, has also indicated that he would step back from America’s partnership with Europe, withdraw support for Ukraine and pursue a more confrontational stance toward China.Workers on a car assembly line in Hefei, China. Beijing has provided enormous incentives for electric vehicles.Qilai Shen for The New York TimesA shipyard in India, which is jockeying to compete with China as the world’s largest manufacturing hub.Atul Loke for The New York Times“The outcome of the elections could lead to far-reaching shifts in domestic and foreign policy issues, including on climate change, regulations and global alliances,” the consulting firm EY-Parthenon concluded in a recent report.Next year’s global economic outlook so far is mixed. Growth in most corners of the world remains slow, and dozens of developing countries are in danger of defaulting on their sovereign debts. On the positive side of the ledger, the rapid fall in inflation is nudging central bankers to reduce interest rates or at least halt their rise. Reduced borrowing costs are generally a spur to investment and home buying.As the world continues to fracture into uneasy alliances and rival blocs, security concerns are likely to loom even larger in economic decisions than they have so far.China, India and Turkey stepped up to buy Russian oil, gas and coal after Europe sharply reduced its purchases in the wake of Moscow’s invasion of Ukraine. At the same time, tensions between China and the United States spurred Washington to respond to years of strong-handed industrial support from Beijing by providing enormous incentives for electric vehicles, semiconductors and other items deemed essential for national security.A protest in Yemen on Friday against the operation to safeguard trade and protect ships in the Red Sea.Osamah Yahya/EPA, via ShutterstockThe drone and missile attacks in the Red Sea by Iranian-backed Houthi militia are a further sign of increasing fragmentation.In the last couple of months, there has been a rise in smaller players like Yemen, Hamas, Azerbaijan and Venezuela that are seeking to change the status quo, said Courtney Rickert McCaffrey, a geopolitical analyst at EY-Parthenon and an author of the recent report.“Even if these conflicts are smaller, they can still affect global supply chains in unexpected ways,” she said. “Geopolitical power is becoming more dispersed,” and that increases volatility.The Houthi assaults on vessels from around the world in the Bab-el-Mandeb strait — the aptly named Gate of Grief — on the southern end of the Red Sea have pushed up freight and insurance rates and oil prices while diverting marine traffic to a much longer and costlier route around Africa.Last week, the United States said it would expand a military coalition to ensure the safety of ships passing through this commercial pathway, through which 12 percent of global trade passes. It is the biggest rerouting of worldwide trade since Russia’s invasion of Ukraine in February 2022.Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the impact of the attacks had so far been limited. “From an economic perspective, we’re not seeing huge increase in oil and gas prices,” Mr. Vistesen said, although he acknowledged that the Red Sea assaults were the “most obvious near-term flashpoint.”Uncertainty does have a dampening effect on the economy, though. Businesses tend to adopt a wait-and-see attitude when it comes to investment, expansions and hiring.“Continuing volatility in geopolitical and geoeconomic relations between major economies is the biggest concern for chief risk officers in both the public and private sectors,” a midyear survey by the World Economic Forum found.With persistent military conflicts, increasing bouts of extreme weather and a slew of major elections ahead, it’s likely that 2024 will bring more of the same. More

  • in

    DHL Workers at Kentucky Air Cargo Hub Go on Strike

    Workers who load and unload cargo planes at DHL’s hub near Cincinnati walked out after months of negotiations failed to produce a contract.More than 1,100 workers at DHL Express’s global air cargo hub at the Cincinnati/Northern Kentucky International Airport went on strike on Thursday after months of failed negotiations with the parcel carrier.A group of DHL workers at the hub who load and unload planes voted in April to unionize with the International Brotherhood of Teamsters, which has been in contract negotiations with the company since July. The union has filed more than 20 unfair labor practice complaints with the National Labor Relations Board since then, accusing the company of retaliation against organized workers. Teamsters Local 100, which represents the unionized workers, voted to authorize a strike on Sunday.“The company forced this work stoppage, but DHL has the opportunity to right this wrong by respecting our members and coming to terms on a strong contract,” Bill Davis, president of Local 100, said in a statement.DHL Express is the U.S. unit of the world’s largest logistics company, Deutsche Post, but accounts for only 2.3 percent of the market in the United States in package volume, according to the Pitney Bowes Parcel Shipping Index. As a German company, it is not able to ship between domestic airports within the United States, so it has to contract out those services and instead focuses on handling international shipments.A DHL spokesman said the company “was fully prepared for this anticipated tactic and has enacted contingency plans” like redirecting shipments to avoid Cincinnati and adding replacement staff members.The company noted that roughly 4,000 employees at the facility were still on the job. It said it did not “anticipate any significant disruptions to our service performance.”“Unfortunately, the Teamsters decided to try and influence these negotiations and pressure the company to agree to unreasonable contract terms by taking a job action,” the company spokesman said in a statement.The DHL strike comes at a time of increased tensions in the industry between companies and organized labor.On Thursday, the Teamsters threated to strike at a United Parcel Service facility in Louisville, Ky., accusing the company of engaging in “similar practices to disrespect and abuse our members in the same state” by laying off administrative workers who had just voted to unionize. The union threatened to strike at UPS as well if it “doesn’t get its act together” by Monday.UPS narrowly averted a strike over the summer after contentious negotiations with the Teamsters, which threatened to halt operations for the country’s largest parcel service.The facility where DHL workers are striking is directly in front of Amazon’s Air Hub, where a unionization effort is underway. Workers there have accused Amazon of illegally impeding organizing efforts. More

  • in

    Bidder Aims to Save Bankrupt Trucking Firm Yellow

    The plan would put Yellow back on the road with thousands of unionized drivers, but would force the government to wait longer for a loan repayment.When Yellow abruptly shuttered its operations in the summer and filed for bankruptcy protection, few thought that a buyer would emerge and try to revive the long-troubled trucking giant.Now a prominent trucking executive has assembled a last-minute plan to acquire Yellow out of bankruptcy — a proposal that seeks not only to rehire many of the company’s employees but also to work with their union, the International Brotherhood of Teamsters, to create a healthy business.The plan rests on getting the Treasury Department to allow Yellow to postpone repayment of a $700 million rescue loan that it made to the company in 2020. The Treasury may not accept the plan because there are legal obstacles to extending the loan. And it stands to be repaid sooner under the plan that Yellow has already filed in the Delaware bankruptcy court, which involves selling the company’s terminals and other assets to raise hundreds of millions of dollars in cash. Some trucking analysts say reviving Yellow will be hard because many customers will have moved on to other trucking companies that are much better run than the old Yellow.But Sarah Riggs Amico, the trucking executive leading the deal, said only her plan could bring back thousands of jobs, adding that she had the experience to build a leaner company in partnership with the Teamsters and assemble an executive team that can win back customers.“Restructuring Yellow provides an opportunity to bring back tens of thousands of fair-wage, union truck-driving jobs while bolstering America’s supply chain,” said Ms. Riggs Amico, the executive chairwoman of Jack Cooper, a private auto-hauling trucking company. “Who wouldn’t find that a worthy effort?”Under the proposal, Ms. Riggs Amico’s group would extend the Treasury loan so that it would be repaid in 2026 instead of next year, according to a person familiar with the bid. The group would also borrow $1.1 billion to pay off other secured creditors and bankruptcy lenders, and provide the new company with cash to operate. And it would issue $1.5 billion of preferred shares to unsecured creditors — the biggest of which is the Central States Pension Fund — that don’t get all their claims paid in bankruptcy. The Central States fund would get some $500 million of the preferred shares, according to the plan, far less than the $4.8 billion that Yellow owes it.Ms. Riggs Amico’s bid will be submitted to the bankruptcy court on Tuesday, when an auction to sell Yellow’s assets will take place.Ms. Riggs Amico and other female executives would own 51 percent of the new company, which would be separate from Jack Cooper. The new Yellow plans to employ some 15,000 people, according to the person familiar with the plan, down from 30,000 earlier this year.“The Teamsters have a framework agreement to lay the foundation for good union jobs, fair wages and strong benefits once a new company is in place,” Kara Deniz, a Teamsters spokeswoman, said in a statement.Government labor market data suggest that roughly 10,000 Yellow employees have found jobs elsewhere, said Avery Vise, vice president of trucking at FTR, a forecasting firm that focuses on the freight industry.That implies that some 20,000 Yellow employees are still looking for work. “I have a lot of friends that are still without jobs,” said Mark Roper, a former Yellow driver from McDonough, Ga., who found a job at another trucking company. “I have a lot of friends that are on the verge of losing their house.”Sarah Riggs Amico, the trucking executive leading a bid for Yellow, ran in a U.S. Senate primary in 2020.Alyssa Pointer/Atlanta Journal-Constitution, via Associated PressThough bringing back lost trucking jobs and resurrecting a unionized company may appear attractive goals to the labor-friendly Biden administration, the Treasury may not believe it has the legal authority to extend the loan — it was made under the CARES Act, passed to provide relief early in the pandemic — and it may have qualms about further backing a company that struggled for years.“There is no clear authority for Treasury to compromise the claim in any way that does not maximize returns for the U.S. government,” said Adam Levitin, a law professor at Georgetown University who specializes in bankruptcy.In a statement, a Treasury spokesperson said: “Treasury is one of several creditors taking part in the bankruptcy process. We will continue to work to ensure taxpayers, and impacted workers and their families are treated fairly.”Thomas Nyhan, the executive director of the Central States Pension Fund, said on Sunday that the fund was trying to determine the financial benefit of each plan as the terms of the rescue bid changed. And he said there may be a legal obstacle: The Employee Retirement Income Security Act generally prevents a pension fund from owning securities issued by companies contributing to the fund — the preferred stock under the Yellow rescue plan — though there can be exemptions. “This is a very complicated problem,” Mr. Nyhan said. “We haven’t come to a conclusion, mainly because the deal keeps evolving.”Members of Congress from both parties have written to the Treasury, urging it to consider extending its loan, including Senators Josh Hawley, Republican of Missouri, and Elizabeth Warren, Democrat of Massachusetts. Mr. Hawley wrote this month that assisting the sale of Yellow to an acquirer was “a common-sense step to keep Yellow’s trucks on the road, and keep its work force gainfully employed.”The Treasury’s loan came from a pot of money to help companies designated as crucial to national security. It drew scrutiny because of the links between Yellow and the Trump administration, and because the Justice Department had sued the company, accusing it of overcharging the Department of Defense for freight services. Yellow last year agreed to pay a $7 million fine to resolve the case.Yellow was a big player — another is Old Dominion — in the less-than-truckload sector, in which a truck will carry goods for more than one customer. Companies in the sector often have a network of terminals and warehouses to store goods between shipments and typically travel shorter distances than truckload companies, whose vehicles carry goods for one customer over longer distances.Analysts say Yellow underperformed because it failed to effectively integrate big acquisitions and because it had higher costs, which some attribute in part to the unionization of its work force.Ms. Riggs Amico, a Democratic primary candidate in Georgia for the U.S. Senate in 2020, has experience restructuring Teamster trucking companies. She oversaw Jack Cooper’s acquisition of two auto-hauling trucking companies with Teamster work forces, and her plan for Yellow envisions hiring executives who specialize in the less-than-truckload business. (Jack Cooper, whose employees belong to the Teamsters, itself filed for bankruptcy in 2019.)Some of Yellow’s rivals are interested in snapping up its terminals under the current plan in Delaware bankruptcy court. Estes Express has submitted a stalking horse bid — an offer intended to set a minimum price for assets — of $1.53 billion for Yellow’s shipment centers. That sum would provide enough cash to pay off the Treasury and a secured loan of around $500 million now held by Citadel, a Wall Street firm. Ms. Riggs Amico’s plan would pay off Citadel but ask the Treasury to extend its loan. Some experts say this would mean taxpayers were taking a back seat to Wall Street.“It’s helping private parties make money off of a distressed-debt investment, and there’s no real reason for Treasury to do that,” Mr. Levitin, the Georgetown professor, said.Citadel declined to comment.In Congress, those open to Ms. Riggs Amico’s bid acknowledge that other creditors would be getting ahead of Treasury but think the compromise a necessary evil to save jobs.But it is not clear whether there would be much room left for a resurrected Yellow. Trucking experts say the market is gradually coping with the loss of the company, which once accounted for roughly 12 percent of drivers in the less-than-truckload sector. Mr. Vise, the trucking analyst, said Yellow’s exit had pushed trucking rates higher as customers scrambled to find other carriers. But he expects the sector to heal soon.“Yellow’s shutdown did not seriously disrupt the less-than-truckload market,” he said. More

  • in

    Drought Saps the Panama Canal, Disrupting Global Trade

    For over a century, the Panama Canal has provided a convenient way for ships to move between the Pacific and Atlantic Oceans, helping to speed up international trade.But a drought has left the canal without enough water, which is used to raise and lower ships, forcing officials to slash the number of vessels they allow through. That has created expensive headaches for shipping companies and raised difficult questions about water use in Panama. The passage of one ship is estimated to consume as much water as half a million Panamanians use in one day.“This is the worst we have seen in terms of disruption,” said Oystein Kalleklev, the chief executive of Avance Gas, which transports propane from the United States to Asia.The problems at the Panama Canal, an engineering marvel that opened in 1914 and handles an estimated 5 percent of seaborne trade, is the latest example of how crucial parts of global supply chains can suddenly seize up. In 2021, one of the largest container ships ever built got stuck for days in the Suez Canal, choking off trade. And the huge demand for goods like surgical masks, home appliances and garden equipment during the pandemic strained supply chains to their breaking point.Before the water problems, the canal handled some 38 ships a day. In July the authorities cut that to 32 vessels.Fewer passages could deprive Panama of tens of millions of dollars in revenue, push up the cost of shipping and increase greenhouse gas emissions when ships travel longer routes.In Panama, a lack of water has hampered canal operations in recent years, and some shipping experts say vessels may soon have to avoid the canal altogether if the problem gets worse. Fewer passages could deprive Panama’s government of tens of millions of dollars in annual revenue, push up the cost of shipping and increase greenhouse gas emissions when ships travel longer routes.Though Panama has an equatorial climate that makes it one of the wettest countries, rainfall there has been 30 percent below average this year, causing water levels to plunge in the lakes that feed the canal and its mighty locks. The immediate cause is the El Niño climate phenomenon, which initially causes hotter and drier weather in Panama, but scientists believe that climate change may be prolonging dry spells and raising temperatures in the region.Before the water problems, as many as 38 ships a day moved through the canal, which was built by the United States and remained under its control until 2000. The canal authority in July cut the average to 32 vessels, and later announced that the number would drop to 31 on Nov. 1. Further reductions could come if water levels remain low. The canal authority is also limiting how far a ship’s hull can go below the water, known as its draft, which significantly reduces the weight it can carry.Container ships, which transport finished consumer goods, typically reserve passage well in advance, and have not faced long delays. But ships carrying bulk commodities generally don’t book passage.Tree trunks are visible due to low levels of water. The drought also presents tough choices for Panama’s leaders, who must balance the water needs of the canal with those of residents.Vessels waiting to cross the Panama Canal. The passage of one ship is estimated to consume as much water as half a million Panamanians use in one day.This presents bulk shipping companies with an expensive calculus: They can risk waiting for days, pay a big fee to jump the line or avoid the canal entirely by taking a longer route.Mr. Kalleklev, the shipping executive, said his company decided in August to pay $400,000 in a special auction to move a ship ahead in the queue, roughly doubling the total cost of using the canal. Other companies have paid over $2 million, a cost they will sometimes bear to ensure ships don’t miss their next assignment. A portion of these extra costs will be passed on to consumers, already pummeled by inflation.The pain, however, has been limited because the U.S. economy is not running very hot and demand for imported goods is relatively muted.“If this was a year ago, when we still had record high freight rates and consumers still spending a lot on containerized goods from the Far East, then you would see more drama than you have now,” said Peter Sand, chief analyst at Xeneta, a shipping market analytics company.But traffic through the canal is likely to remain at lower levels in the coming months. Reducing passages helps conserve water, because huge amounts are used up every time a ship goes through the locks as it travels the 40 miles across Panama.The drought also presents tough choices for Panama’s leaders, who must balance the water needs of the canal with those of residents, over half of whom rely on the same sources of water that feed the canal.The canal’s board recently proposed building a new reservoir in the Indio River to bolster the water supply and increase traffic through the canal, which generates over 6 percent of Panama’s gross domestic product. Under the plan, the new water supply could allow for an additional 12 to 15 passages daily.For over a century, the Panama Canal has provided a convenient way for ships to move between the Pacific and Atlantic Oceans.The canal’s board recently proposed building a new reservoir in the Indio River to bolster the water supply and increase traffic through the canal.“In optimal terms, the canal can handle 38 transits per day, so 12 to 15 is a lot,” said Rodrigo Noriega, a lawyer and a columnist for Panama’s La Prensa newspaper.Building the reservoir is expected to cost nearly $900 million, and the canal authority could start accepting bids from contractors toward the middle of next year with construction starting early in 2025. But that timeline could well be delayed; the construction of larger locks was completed two years late, in 2016, and that project was marred by cost disputes.The new reservoir would also involve acquiring land that is protected by a 2006 law, and displace at least some of its inhabitants. Mr. Noriega said he expected Panama’s legislature to pass a law that would lift the ban on acquiring land. But he and others note that new water sources could also be built in other places.Without a new water source, the canal could lose significant amounts of business. Other ocean routes are, of course, longer and more expensive, but they are less likely to have unpredictable delays. One alternative is to transport goods between Asia and United States through the Suez Canal to the East Coast and Gulf Coast. Another is to ship goods from Asia to the West Coast ports — and then transport them overland by train or truck.“In theory, something that offers a cheaper, shorter route should always be in favor, but it’s the uncertainty that can be a killer,” said Chris Rogers, head of supply chain research at S&P Global Market Intelligence.Protracted disruptions at the canal could stoke interest in building land routes in Mexico, Colombia and other countries that have coastlines on both oceans, said Richard Morales, a political economist who is running as an independent candidate for vice president in an election next year.The efforts to secure new water supplies could be a race against climate change.Because interest in building a canal dates to the 19th century, Panama has rainfall records going back some 140 years. That gives scientists more confidence when concluding that a weather change is a permanent shift and not merely random, said Steven Paton, a director of the Smithsonian Tropical Research Institute’s Physical Monitoring Program on an island in Lake Gatun, which makes up a large part of the canal and supplies most of its water.He said that while scientists were unsure about climate change’s impact on El Niño, two of the driest El Niño periods of the last 140 years had occurred in the last quarter-century, and that the current one could be the third.“It doesn’t say that this is climate change,” Mr. Paton said, “but it does say that this is wholly consistent with almost all of the climate change models.”Sol Lauría More

  • in

    Shipping Contributes Heavily to Climate Change. Are Green Ships the Solution?

    On a bright September day on the harbor in Copenhagen, several hundred people gathered to welcome the official arrival of Laura Maersk.Laura was not a visiting European dignitary like many of those in attendance. She was a hulking containership, towering a hundred feet above the crowd, and the most visible evidence to date of an effort by the global shipping industry to mitigate its role in the planet’s warming.The ship, commissioned by the Danish shipping giant Maersk, was designed with a special engine that can burn two types of fuel — either the black, sticky oil that has powered ships for more than a century, or a greener type made from methanol. By switching to green methanol, this single ship will produce 100 fewer tons of greenhouse gas per day, an amount equivalent to the emissions of 8,000 cars.The effect of global shipping on the climate is hard to overstate. Cargo shipping is responsible for nearly 3 percent of global greenhouse gas emissions — producing roughly as much carbon each year as the aviation industry does.Figuring out how to limit those emissions has been tricky. Some ships are turning to an age-old strategy: harnessing the wind to move them. But ships still need a more constant source of energy that is powerful enough to propel them halfway around the world in a single go.Unlike cars and trucks, ships can’t plug in frequently enough to be powered by batteries and the electrical grid: They need a clean fuel that is portable.Ursula von der Leyen, center, the president of the E.U. Commission, stands with the captains of the Laura Maersk as well as company and government officials in Copenhagen in September.Betina Garcia for The New York TimesThe Laura Maersk is the first of its kind to set sail with a green methanol engine and represents a significant step in the industry’s efforts to address its contribution to climate change. The vessel is also a vivid illustration of just how far the global shipping sector has to go. While roughly 125 methanol-burning ships are now on order at global shipyards from Maersk and other companies, that is just a tiny portion of the more than 50,000 cargo ships that ply the oceans today, which deliver 90 percent of the world’s traded goods.The market for green methanol is also in its infancy, and there is no guarantee that the new fuel will be made in sufficient quantities — or at the right price — to power the vast fleet of cargo ships operating worldwide.Shipping is surprisingly efficient: Transporting a good by container ship halfway around the world produces far less climate-warming gas than trucking it across the United States.That’s true in part because of the scale of modern cargo vessels. The biggest container ships today are larger than aircraft carriers. Each one is able to carry more than 20,000 metal containers, which would stretch for 75 miles if placed in a row.That incredible efficiency has lowered the cost of transport and enabled the modern consumer lifestyle, allowing retailers like Amazon, Walmart, Ikea and Home Depot to offer a vast suite of products at a fraction of their historical cost.Yet that easy consumption has come at the price of a warmer and dirtier planet. In addition to affecting the atmosphere, ships burning fossil fuel also spew out pollutants that reduce the life expectancy of the large percentage of the world’s people who live near ports, said Teresa Bui, policy director for climate at Pacific Environment, an environmental organization.Cargo ships at the Port of Los Angeles in 2021 sometimes had to wait days to dock because of congestion, producing huge amounts of pollution.Coley Brown for The New York TimesThat pollution was particularly bad during the Covid-19 pandemic, when supply chain bottlenecks caused ships to pile up outside of the Port of Los Angeles, producing pollution equivalent to nearly 100,000 big rigs per day, she said.“They have been under regulated for decades,” Ms. Bui said of the shipping industry.Some shipping companies have tried to cut emissions in recent years and comply with new global pollution standards by fueling their vessels with liquefied natural gas. Yet environmental groups, and some shipping executives, say that adopting another fossil fuel that contributes to climate change has been a move in the wrong direction.Maersk and other shipping companies now see greener fuels such as methanol, ammonia and hydrogen as the most promising path for the industry. Maersk is trying to cut its carbon emissions to zero by 2040, and is pouring billion of dollars into cleaner fuels, along with other investors. But making the switch — even to methanol, the most commercially viable of those fuels today — is no easy feat.Switching to methanol requires building new ships, or retrofitting old ones, with different engines and fuel storage systems. Global ports must install new infrastructure to fuel the vessels when they dock.Perhaps most crucially, an entire industry still needs to spring up to produce green methanol, which is in demand from airlines and factory owners as well as from shipping carriers.Methanol, which is used to make chemicals and plastics as well as fuel, is typically produced using coal, oil or natural gas. Green methanol can be made in far more environmentally friendly ways by using renewable energy and carbon captured from the atmosphere or siphoned from landfills, cow and pig manure, or other bio waste.By using green methanol, the Laura Maersk could produce 100 fewer tons of greenhouse gas per day, equivalent to the emissions of 8,000 cars.Betina Garcia for The New York TimesCargo ships require fuel sources that are powerful enough to propel them halfway around the world in a single go.Betina Garcia for The New York TimesFlemming Sogaard Christensen, the chief engineer of the Laura Maersk, inside the engineering room. The ship’s engine can burn oil or a greener type of fuel made from methanol.Betina Garcia for The New York TimesBut the world today does not yet produce much green methanol. Maersk has committed to using only sustainably produced methanol, but if other shipping companies end up using methanol fuel made with coal or oil, that will be no better for the environment.Ahmed El-Hoshy, the chief executive of OCI Global, which makes methane from natural gas and greener sources like landfill gas, said companies today were producing “infinitesimally small volumes” of green methanol using renewable energy.“Companies haven’t done much in our industry yet quite frankly,” he said. “It’s all hype.”Fuel producers still need to master the technology to build these projects, he said. And in order to finance them they need buyers who are willing to commit to long-term contracts for green fuel, which can be three to five times as expensive as conventional fuel.Maersk has signed contracts with fuel providers including OCI and European Energy, which is building in Denmark what will be the world’s largest plant producing methanol with renewable electricity. The shipping company already has clients like Amazon and Volvo that are willing to pay more to have their goods transported with green fuels, in order to reduce their own carbon footprints.But many other companies are not yet willing to pay the necessary cost for greener technologies, Mr. El-Hoshy said.The missing piece, said Mr. El-Hoshy and others in the shipping and methanol industries, is regulation that would help level the playing field between companies trying to clean up their emissions and those still burning dirtier fuels.The European Union is ushering in rules that encourage ships to decarbonize, including new subsidies for green fuels and penalties for fossil fuel use. The United States is also spurring new investments in green fuel production and more modern ports through generous domestic spending programs.Maersk has clients like Amazon and Volvo that are willing to pay more to have their goods transported with green fuels, in order to reduce their own carbon footprints.Betina Garcia for The New York TimesBut proponents say the key to a green transition in the shipping sector are global rules that are pending through the International Maritime Organization, the United Nations body that regulates global shipping.The organization has long received heavy criticism for its lagging efforts on climate. This summer, it adopted a more ambitious target: eliminating the global shipping industry’s greenhouse gas emissions “by or around” 2050.To get there, nations have promised to agree on a legally binding way to regulate emissions by the end of 2025, which they would put into effect in 2027.Yet countries have yet to agree on what kind of regulation to use. They are debating whether to adopt a new standard for cleaner fuels, new taxes per ton of greenhouse gas emitted or some kind of mix of tools.Some developing countries, and nations that export low-value goods like farm products, say that strict regulation would raise shipping costs and be economically harmful.Proponents of the regulation — including Maersk — say it’s necessary to avoid penalizing those who are trying to clean up the business, and provide certainty about the industry’s direction.“There has to be an economic mechanism by which you level the playing field so that people are incentivized and not punished for using low-carbon fuels,” said John Butler, the chief executive of the World Shipping Council, which represents container carriers including Maersk.“Then you can invest with some confidence,” he added.A container ship traveling halfway around the world produce less climate-warming gas than a truck traveling across the United States.Betina Garcia for The New York TimesVincent Clerc, the chief executive of Maersk, said the company would continue to adopt new green technologies as they became available.Betina Garcia for The New York TimesStill, Maersk acknowledges that green methanol is unlikely to be the final solution. Experts say that the fuel’s reliance on finite sources of waste, like corn husks and cow manure, mean there will not be enough to power the entire global shipping fleet.In an interview, Vincent Clerc, the chief executive of Maersk, said that the entire maritime sector was unlikely to ever be powered predominantly by methanol. But Maersk had no regrets about moving some of its fleet from fossil fuels to methanol now, then adopting new technologies as they become available, he said.“This marks a real systemic change for this sector,” Mr. Clerc said, gesturing toward the vessel piled high with 20-foot containers in front of him.Eric Leveridge, the climate campaign manager for Pacific Environment, said his group was glad that Maersk and other shipping companies were moving toward more sustainable fuels. But the organization is still concerned that “it is more for optics and that the impact is potentially being exaggerated,” he said.“When it comes down to it, even if there is this investment, there’s still a lot of heavy fuel oil ships on the water,” he said. More