OmnipotentGlobalization is Leading to Significant World Economic Interdependence*
By March 18, 2025, the pandemic has not only spread globally but has also significantly reduced economic activity around the world, including in the US. The remaining supply chains, particularly slower-moving ones in essential commodities, have been affected. In this context, the Panama Canal, a critical artery for global commerce, is now reeling under the financial pressure of weakened container flows.
On March 16, 2025, the S&P Global Ratings lowered the outlooks of CK Hutchison Holdings, the Hong Kong-based infrastructure conglomerate that controls port operations on either side of the Panama Canal, to negative from stable. According to S&P’s Raymond Munn, this could lead to a one-to three-notch downgrade within the next one to two years. The rating agency noted that the recent suspension of the Euro Med container service, which runs cargo containers between ports in the Mediterranean and the East Coast of the US, shows that there is “financial pressure mounting on the business and its profitability”.
The Euro Med program was launched in 2009 to aid struggling regional economies. The five-year EUR 500 million ($549 million) investment in the program was a partnership between the European Investment Bank and the Med-Mash R&D Centre of Excellence for Logistics and Intermodal Transport, with the aim of promoting intra-regional trade and creating jobs for the UN’s Alliance for Recovery and New Growth (ARG) in the Mediterranean region. However, the program ended in 2015, with the banks and transport companies involved stating that the venture had reached its stipulated five-year length.
Nevertheless, the container flows through the Suez Canal have not been affected much. According to data from the Suez Canal Authority (SCA), global shifts in shipping speeds and schedules mean that fewer vessels are being loaded in major European ports and therefore fewer vessels are being diverted via the canal’s alternative route, which passes through the Mediterranean and East Coast of the US. This tactic allows ships to avoid Africa at close to the strait of Dover speeds.
On March 12, 2025, the SCA also announced that 1,083 vessels had traversed the waterway during that month, a year-on-year increase of 19.4%. “The Suez Canal maintains its position as the shortest and most competitive trade route between Asia and Europe,” the authority said in a statement.
Slower-moving goods, however, are not crossing the Panama Canal as frequently. Last year, the canal handled nearly 6,500 capesize, panamax and supramax vessels, while other slow-moving vessels, such as crude carriers and tankers which carry liquefied natural gas, ferried about 2,000 trips through the waterway. This year, crude carriers have handled only about 800 trips, a 55% decline from 2019, while tankers have traversed about 1,000 trips, a 50% fall compared with last year’s figures.
However, the situation is not all doom and gloom, with favorable output from South America on the horizon. The country’s business-friendly atmosphere and manufacturing potential have led the Asturias Investment Promotion Agency (IAE) to target CK Hutchison-owned companies, such as Port of Tangier, one of the largest ports in the Mediterranean, for investment in its modernization programs.
Moreover, Ricardo Juan Cotarelo Crespo, the IAE’s interim executive director, expressed enthusiasm for the idea of Port of Tangier facilitating South American exports to the Mediterranean, where the IAE has sought CK Hutchison’s investment in intermodal transport as well as in the port sector. This highlights the economic and political interdependence between Asia and South America, reinforcing the ongoing tendencies of the era of globalization, regionalization, hybridization, and horizontalization.
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*This information is not meant to be a
recommendation to buy or to sell any security. The text above is based on news reports. No editorial committee was involved in its preparation. This report should be taken as a preliminary document and an indication of Top Tier’s initial analysis and preliminary portrayal of certain demand drivers and their potential foreshadowing of Commonwealth Bank of Australia (CBA) CEO Pennicott’s remarks related to the bank’s credit portfolio and the state of the Australian real estate market. Demand Drivers Economics Analytics March 18, 2025.
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