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In 2025, global shipping has become one of the most unstable operating environments in decades. For management teams, this is no longer a distant geopolitical issue or a simple cost variable in supply chain budgets. It is a direct and persistent threat to business continuity, profitability, and reputation.
Geopolitical conflict, climate stresses, tightening regulation, aging infrastructure, and labor unrest have converged to create a fragile global shipping system. These pressures expose multinational companies to chokepoint disruptions that can ripple through every business unit — from manufacturing schedules and procurement costs to customer delivery timelines and sustainability reporting.
For management, the core task is not simply to move goods across oceans. It is to anticipate persistent instability, test supply chains for hidden vulnerabilities, and design adaptive logistics strategies that can withstand shocks.
Key takeaways for management teams
- Shipping is now a strategic vulnerability. It is no longer just a line-item expense but a potential disruptor of operations, market share, and investor trust.
- ESG scrutiny is intensifying. Regulators and investors demand visibility beyond Tier-1 suppliers, particularly where shadow fleets or poorly insured carriers are involved.
- The management lens must shift. The central question is not “what will this shipment cost?” but “what happens if this corridor fails tomorrow?”
- Disruptions will persist. With no clear resolution to the Red Sea or Suez Canal restrictions, expect heightened complexity and costs across global supply chains.
Global maritime trade by the numbers
Critical chokepoints — the Suez Canal, Panama Canal, Strait of Hormuz, Strait of Malacca and Taiwan, and the Bab el-Mandeb Strait — remain the arteries of global commerce. Up to half of global sea trade is now considered at risk of interruption from geopolitical tensions and climate impacts.
As shown in Exhibit 1, transits through both the Suez and Panama Canals have declined year-over-year. These are not isolated incidents but evidence of systemic strain that could upend global trade flows.
The cost of rerouting away from the Red Sea
The Red Sea crisis has forced shipping companies to classify the area as a restricted zone. With the Suez Canal handling 12% of global maritime commerce, its disruption cascades across global supply chains.
Traffic through the Bab al-Mandab Strait has collapsed, redirecting vessels around the Cape of Good Hope. This adds 2–4 weeks of transit time, increases fuel consumption, raises crew wages, drives up insurance premiums, and exposes ships to piracy risk.
The costs are stark:
- Shanghai → Genoa: +97% year-over-year
- Shanghai → Los Angeles: +133%
- Shanghai → New York: +101%
Management teams must account not only for higher shipping rates, but also for congestion, delivery uncertainty, and elevated emissions — all of which carry financial and reputational costs.
Climate risks in the Panama Canal
The Panama Canal, which carries 5–6% of global maritime trade and nearly 40% of U.S. container traffic, faces chronic water scarcity. The reliance on freshwater reservoirs means that drought directly limits capacity.
Although operating more smoothly in mid-2025 — averaging 33 transits per day — the Canal remains a water-constrained corridor. Any prolonged dry spell could choke flows with little warning. The proposed $1.6 billion Río Indio reservoir may help, but environmental and political challenges make timelines uncertain.
For management teams, this underscores the need to model drought scenarios in shipping forecasts and diversify transit strategies before constraints reemerge.
ESG scrutiny and shadow fleets
Management cannot ignore the reputational and compliance risks emerging in maritime logistics. Since the invasion of Ukraine, shadow fleets have grown by more than 40%. These aging tankers operate in a regulatory gray zone, often concealing sanctions-violating activity.
While cheaper in the short term, reliance on such fleets introduces material risks: regulatory penalties, environmental liabilities, and reputational damage. Investors and regulators increasingly expect companies to map their suppliers down to Tier-2 and Tier-3 to ensure compliance with EU CSRD, U.S. import rules, and other ESG standards.
Disruptions are already hitting industry
- Tesla halted German production for two weeks in 2024 due to Red Sea shipping delays.
- Maersk paused container traffic in the Red Sea, citing a 15–20% capacity loss on key Far East–Europe routes.
- BP and Shell suspended Red Sea shipments indefinitely due to safety concerns.
- Volvo suspended production for three days at its Ghent plant due to delayed components.
- H&M faces ongoing exposure to freight delays and route instability given reliance on Asian suppliers.
- The Port of Eilat (Israel) collapsed economically after an 85–90% drop in shipping activity.
These examples highlight the operational consequences management teams must prepare for: stalled factories, missed market windows, inflated freight budgets, and collapsed regional trade hubs.
Actions management teams can take:
- Treat shipping volatility as a top-tier enterprise risk. Integrate maritime disruptions into strategic and operational planning, not just procurement.
- Build real-time risk dashboards. Track cost spikes, chokepoint congestion, incident frequency, and supplier dependencies to enable fast response.
- Develop contingency plans. Model scenarios for Suez, Panama, or Red Sea closures and test how quickly your business can adapt.
- Map suppliers deeply. Ensure visibility into Tier-2 and Tier-3 networks for ESG compliance and resilience planning.
- Audit digital and physical resilience. Strengthen port IT systems, undersea cable security, and vessel tracking.
- Evaluate hedging strategies. Protect against volatile shipping rates and insurance premiums through financial instruments.
Key questions for management
- How dependent are our operations on vulnerable corridors such as the Suez Canal or Panama Canal?
- What is our cost and delivery exposure if disruptions last another 12–18 months?
- Do any of our suppliers rely on shadow fleets?
- How quickly can we shift to alternate sourcing or logistics routes without crippling operations?
- Are we adequately disclosing emissions, risks, and compliance exposures tied to shipping in ESG reporting?
- What financial or operational levers can we use to stabilize performance in this volatile environment?
Additional Telesto resources:
- Board series: Know your supplier – Diversification risks amidst escalating trade wars
- Management briefing: Corporate diplomacy in the age of economic warfare
- Management briefing: Onshoring to the U.S. – Have boards considered the physical risks?
- Atlas, equips your organization’s corporate directors and leaders with the insights and knowledge necessary to stay up to date, mitigate risks, and seize business opportunities associated with sustainability, climate, and ESG
- Prism, our ESG benchmarking tool, helps your organization to rapidly strengthen its Sustainability, Climate, and ESG performance and disclosures through in-depth benchmarking of industry peers and identification of gaps and areas of distinction
If your organization needs to secure continuity, protect margins, and meet rising expectations in a fragile supply chain, contact Telesto Strategy.
