Over 80% of traded goods are moved over water. Shipping is the backbone of world trade, driving and driven by globalization. But as the recent blockage of the Suez Canal shows, maritime chokepoints can cause havoc to complex supply chains. As trade increases, so do these risks – and the search for ways round them.

Seen from space, the Suez Canal stands out against the contours of the Asian and African continents, connecting the Mediterranean Sea to the Indian Ocean via the Gulf of Suez and the Red Sea. Since opening in 1869, it has served as a maritime shortcut between the Asian, African and European markets. Today 12% of world trade passes through the human-made passageway.

In March 2021, the container ship Ever Given blocked the Suez Canal for six days, holding up nearly $775 million worth of goods on the ship and sending shock waves through global supply chains. With 85% of goods by volume shipped by sea, it was a reminder of how dependent our economies are on the flow of traffic along maritime trade routes – and how easily things go wrong.

Little changed over time, many of our maritime trade routes have existed for hundreds, if not thousands, of years. "In the Age of Sail, ships naturally had to follow the prevalent sea currents and wind patterns. With the introduction of the steam engine, shipping routes were set and haven't changed since," explains Jean-Paul Rodrigue, professor of geography at Hofstra University in the US and author of The Geography of Transport Systems.

Recently, the emergence of potential new maritime trade routes such as the Arctic Route have attracted great interest. But establishing a new route is not easy. "There are many reasons why the Arctic would not work as a shipping route. It would require specialized ships and would still only be seasonal. From a cost/benefit perspective, it doesn't appear to be profitable," says Rodrigue. "And if the Arctic Route did become economically viable year-round, that would be our least concern – if the ice had melted to that extent, many coastal ports would be submerged." Considering how well established today's maritime trade routes are, and how reliant we are on them, there are still a number of key chokepoints that pose a serious and growing risk for global shippers. Any infrastructural entity within a supply chain that forces a convergence of traffic can be a chokepoint. Straits, canals, ports, bridges – there are many potential bottlenecks that goods must routinely pass to reach their destination.

The majority of chokepoints were, historically, strategic geopolitical assets for the countries that controlled them. The Suez Canal was built for European interests to connect with their colonies. The Panama Canal was an American attempt to connect east and west coasts. Today, these assets are managed by independent authorities that operate like businesses under commercial pressure and principles – which means it is in their interest to keep traffic flowing.

Not all chokepoints, however, are human-made. Of the world's 14 major chokepoints, the Strait of Malacca is the most important. It links the South China Sea with the Indian Ocean, carrying 40% of the world's trade. Annually nearly 100,000 vessels pass the strategic waterway which, at its narrowest point, is only around 2.7 kilometers wide.

The reason for the heavy traffic in the strait is the ever-advancing globalization of our world economy. "Over the past four decades, global trade not only increased significantly, but also saw a shift from Atlantic to Pacific trade. That put chokepoints under increasing pressure," says Rodrigue.

Assessing and mitigating these risks is the job of the insurer. Lars Lange is secretary general of the International Union of Marine Insurance in Hamburg, Germany. "As supply chains become more complex, they also become more vulnerable," he says. "In China, for example, one of the biggest ports in the world went into lockdown when one employee was infected with Covid-19."

Indeed, many chokepoints are caused by a confluence of nature and human behavior. As the Covid-19 pandemic raged around the world, 400,000 seafarers were unable to leave their ships. The transport industry expects many workers to quit in the wake of this experience, further disrupting troubled supply chains.

Meanwhile, harbors along the west coast of the US currently cannot cope with the increase in traffic, and drought has made some of South America's inland waterways unnavigable, impacting world trade in grains and iron ore. On top of that, there is currently a shortage of shipping containers everywhere. "International trade would not be possible without financial backing for cases in which it goes wrong," says Lange. "We see ourselves as enablers."

The insurer's job is to model risks, calculate future exposure to risks and advise on ways to avoid them. "We look at the size of the ship, the weather situation, the influence of pilots and the claims frequency of vessels, and then take into account what the consequences could be," says Lange. What salvage operations are available, can the ship be refloated, can the cargo be kept safe, are there alternative routes and how much longer do they take, do they pass regions with piracy? All this helps to create an overall picture.

The consequences of disruption are as varied as the goods transported along the main maritime arteries. The damage may be limited to a local area, but it could also cause systemic collapse if essential goods cannot leave an exporting country or region. For consumers it could mean a delay in receiving a luxury gadget, but for the poorest countries that rely on food imports the consequences can be dire. "Depending on the magnitude of the disruption and how long it lasts, how critical the supply chain is, and which markets are affected on either side of the blockage, it could have much broader spillover effects and a longer-term impact on price and market stability," says Richard King, senior research fellow in the Environment and Society Programme at Chatham House. "If supplies become scarce, it can even lead to export bans. For some perishable foodstuffs stuck in transit it simply means the end of that supply."

King believes that global warming poses the greatest risk overall to maritime trade. "Climate change is a risk multiplier. It impacts infrastructure and causes floods, droughts and storm surges. Risks are compounded, like security and conflict that trigger geopolitical tensions. The more extreme and more frequent climate change-driven impacts get, the higher the risk to supply chains," he says.

In the worst case, climate-related impacts could block multiple passageways. "If several of the main arteries from breadbaskets in Eastern Europe, Central Asia, North America and Southeast Asia got disrupted at the same time – cargo from the Black Sea region alone has to pass three chokepoints to reach East African ports – and these interruptions coincided with climatic disruptions to harvests, a significant portion of global food wouldn't reach the markets with the biggest impact on the most vulnerable," says King.

Consumers as well as states – both the wealthy and the poor – all have an interest in mitigating the risk arising from our continuing dependency on sea trade. In some cases, it is simply a question of market management. Rodrigue gives an example: "If there are too many ships approaching the Suez Canal, a bidding system can be introduced whereby customers who are prepared to pay can use the infrastructure. Markets tend to be pretty good at discriminating around what matters and what matters less."

But many of the other challenges shipping faces are more complex. "The list of factors that could disrupt supply chains is jaw-dropping, from climate change to a local strike. But when it happens, it's mostly at strategic gateways or corridors. So there is a predictable unpredictability," says Rodrigue. And the best way to tackle this is resilience – designing systems with alternatives.

King argues that port infrastructure needs to be upgraded to cope with potential storm surges and poorer countries should take a strategic view of food storage. Better transparency along supply chains is also important. "Accurate assessments of food stocks are essential to bring together the theoretical chokepoint risks and real-time market data," says King. Lange argues that more incident-driven information is required in order to better learn from past mistakes.

Unless we recognize the burgeoning threats to our complex supply chains the likelihood of a serious breakdown is not a question of if, but rather a question of when. "Unfortunately, it usually takes a crisis to happen before we take appropriate action," says King. "It's probably going to take a series of shocks to nudge us in the right direction, and we've got to be hopeful that those shocks are manageable rather than being truly catastrophic."