Rock and a hard place

The global shipping industry is currently juggling crises taking place more than 7,000 miles apart: Houthi rebels’ attacks on ships in the Red Sea, and a drought that has slashed ship crossings in the Panama Canal. And those came before the East Coast was hit with additional supply chain stresses following the collapse of Baltimore’s Key Bridge.

For the most part, the Houthis’ attacks, which started in October 2023, are mainly impacting ships traveling between Far East Asia and Northern Europe, not the Port of Virginia, says Ricardo Ungo, director of Old Dominion University’s Maritime, Ports and Logistics Institute. “We are not in the … line of impact.”

Port officials agree with that assessment.

“Outside of a very small handful of delayed vessels in early January, we haven’t had any negative effects,” Port of Virginia spokesperson Joe Harris says, and Aubrey Layne Jr., board chair for the Virginia Port Authority, notes that the Houthi-related local slowdown “sort of adjusted itself out” by March. 

The Panama Canal drought, which has prompted a 30% decrease in the number of ships passing through the canal as of late last year, is also causing minimal disruption at the Port of Virginia.

“Really, it’s bulk carriers that have been really restricted in the Panama Canal,” Layne says. “We don’t do much of that in our terminal.”

But Virginia’s cargo volumes are likely to increase considerably this year because of vessels and cargo redirected from the Port of Baltimore, which was disrupted in late March after a deadly container ship collision destroyed Baltimore’s Key Bridge.

Meanwhile, Yemen’s Houthi rebels, who are backed by Iran’s government, have been launching drones and missiles at Israel, in response to the Middle East nation’s war on Gaza that began in October 2023. According to news reports, the group said it was attacking ships in the Red Sea and the Gulf of Aden that were connected to Israel.

However, as months have passed, and the U.S. and United Kingdom have launched airstrikes on Houthi positions beginning in January, rebels have attacked more ships tied to the U.S. and the U.K., and now have launched weapons at civilian and military vessels at least 50 times, according to the U.S. Department of Defense.

The situation became grimmer in early March, when a missile hit a bulk carrier in the Gulf of Aden, killing three crew members and injuring others.

That leaves ships a difficult choice.

About half of the carriers that previously traveled the Red Sea have rerouted around Africa, causing significant delays, Ungo says, and the other half “are risking it.”

Meanwhile, reports emerged this year that Somali pirates have begun hijacking ships in the western Indian Ocean again, about a decade after a string of Somali pirate attacks on ships that ran from 2008 to 2014.

The Panama Canal drought, meanwhile, forced authorities to cut the number of vessels allowed to pass per day in December 2023, but conditions have improved in 2024, following higher rainfall. Reuters reported in February that the canal did not expect to place further limits on transit until at least April, and the region’s rainy season is expected to arrive in May.

Although the Red Sea and Panama crises’ impact on the Port of Virginia appears to be minimal, U.S. Sen. Tim Kaine’s office is watching both situations, especially as they “could cause uncertainty and increase costs to consumers,” Kaine said in a statement to Virginia Business in March.

In January, Kaine signed a bipartisan letter pressing the Biden administration on its plans for responding to the Houthi attacks, advocating for “smart steps” to hold the Houthis accountable while encouraging the administration to develop a strategy to reduce escalation of the crisis.

“It’s crucial that the steps we take to address the threats posed by the Houthis are multinational — because other countries are impacted, too — and part of a larger strategy that protects commerce in Virginia and helps de-escalate tensions in the region,” Kaine says.

Ungo and Rafael Diaz, director of ODU’s Maritime Research Cluster, say that consumers buying overseas goods will likely be hit with higher costs as a result of the two shipping disruptions, and the compounded effect of the drought and rebel attacks is larger than the individual disruptions, Diaz says.

Also, economists at J.P. Morgan Research estimated in February that shipping disruptions could increase overall core inflation by 0.3 percentage points during the first half of 2024.

Still, Harris says that the shipping industry is making necessary adjustments, “to ensure ample capacity and reduce delays in service. … The industry is settling into a new pattern that is keeping the cargo flowing.”

It would be valuable for Port of Virginia leaders to carefully study the impact of the shipping crises, Ungo and Diaz agree, since there are bound to be more challenges facing the industry in the future.

“Probably the most important question going forward,” Ungo says, “is how we can improve the management of the disruptions.”