Enterprise explains: What shipping companies are doing to mitigate the impacts of climate change on trade (Part 2). Last week, we looked at the impact of climate change on global trade routes, and how logistics infrastructure — ranging from ports to canals — are seeing fundamental changes as the world warms up. Shipping companies and logistics firms have been exploring a vast array of solutions and alternatives to mitigate these impacts, from turning to new technology, such as AI, to opting for alternative trade routes and introducing new types of vessels to accommodate low water levels.

Shipowners are currently having to adapt to these changes before our eyes: The Panama Canal — which directly depends on the availability of freshwater for the passing of ships — has been forced to limit traffic as it faces low water levels during the summer. The traffic build up is causing congestion and pushing shipping companies to shift their routes to the Atlantic Basin, S&P Global writes. The traffic restrictions imposed by the canal Authority have caused wait times to surge to 20-21 days, and led shipowners to look for a “path of least resistance,” S&P quotes a ship owner as saying. Shipowners are even willing to charge less on rates from the US Gulf to Brazil or Europe to avoid the canal, S&P writes.

Beyond the Panama Canal crisis, shipping companies are looking ahead and adapting by introducing low-water tankers: Chemical company BASF recently launched a vessel with Stolt Tankers with a new design that can accommodate low water levels in Europe’s Rhine river.

The new tanker boasts larger dimensions of 135 by 17.5 meters to help achieve a high load-bearing capacity, as well as a hydrodynamically optimized, lightweight hull and a special propulsion system adapted to allow safe operation in extreme low water conditions. The design allows the tanker to optimize cargo capacity to some 5.1k tonnes, the statement said. The cost of the vessel, though, is hefty, at EUR 10 mn, Bloomberg reports.

Maersk is also working to optimize ship designs and operations to mitigate the impact of extreme weather, Maersk’s head of marine standards, Aslak Ross, is quoted as saying by technology solution provider Wartsila. “We have, for instance, strengthened the monitoring from our voyage center, lowered the threshold when seeking additional weather routing advice and taken an ever further conservation approach to balancing energy efficiency and navigational safety,” he explained.

But adoption is slow: Freight operator HGK, which operates 350 barges in European rivers, currently only has four low-water vessels, with three more underway, Bloomberg reports.

Infrastructure changes are not off the table — but they’re not ideal: Expanding and dredging shipping channels is another potential solution — but one that’s both expensive and harmful to the environment, CNBC quotes Deutsche Bank Economist Marc Schattenberg saying.

Other modes of transport are also more expensive: Switching to other modes of transport is an option but it is expensive — Schattenberg gives the example of a 135-meter long Rhine, with a 3 meter draft, which can carry some 2.7k tons of freight. It would need the equivalent of 110 large trucks to carry the same amount of freight, he adds.

SO WHAT COULD WORK?

Regionalization — or reshoring and nearshoring — is one of the most likely scenarios: One key way shipping firms are looking at making their supply chains more resilient is through reshoring, which involves moving production and manufacturing processes from abroad back to their original countries, and nearshoring, where a company moves production to a country closer to their location and time zones, Wartsila quotes Head of Utah State University’s management department Vijay Kannan as saying. This helps make supply chains shorter and can reduce lead times, freight costs, and emissions, while giving leverage to the companies to increase their control, responsiveness, and resilience, supply chain expert Mark Millar tells Wartsila.

Combating disruption to global trade routes also requires climate risk management: Relying on advanced weather modeling and predictive analytics will help organizations understand how climate change will impact their supply chains, according to Everstream Analytics. Shipping companies can leverage tech to anticipate risks, and make proactive decisions to minimize disruptions and delays. Investments in the expansion of predictive software are “conceivable,” CNBC quotes Deutsche Bank Economist Marc Shattenberg as saying.

Planning for the “new normal” with AI monitoring: High-impact weather and climate events — from heat to drought and flooding — are expected to be the new normal, Everstream writes separately. It will no longer suffice to rely on historical weather records for shipping companies to plan their operations, which is where AI modeling comes in, Everstream writes. An AI-powered supply chain can provide for maximum visibility, predictive analytics, and a foundation for autonomous systems to reduce costs to protect the supply chains’ hidden fragilities, according to an Everstream Report (pdf).

Again, time and money are of the essence: A number of companies are using predictive software, but these investments need time before they make substantial returns, Tim Beckhoff, a procurement and supplier management expert at McKinsey, told CNBC. “The ones who are really successful are the ones who started looking to this four or five, six years ago,” Beckhoff said.

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