Square Insights The Five Major Canals & Straits Chokepoints
Influencing Global Logistics

Key Summary at a Glance

Major canals and straits are key routes where global maritime logistics flows converge, as well as strategic chokepoints.
The Suez Canal, Panama Canal, Malacca Strait, Hormuz Strait, and Bab el-Mandeb Strait each connect different waterways and serve distinct functions, impacting freight rates, lead times, and supply chain risks in various ways.
Recently, factors such as geopolitical conflicts, climate change, and the increasing size of vessels have made changes in the passage or operating conditions of certain canals, playing a role as crucial variables affecting overall global logistics costs and transportation schedules.

1. What Are the Major Canals and Straits?

Major canals & maritime chokepoints refer to strategic waterways that connect continents or major seas, where global maritime logistics converge.
These waterways serve as key infrastructure that determines the speed, cost, and stability of global trade, beyond being mere passages.
Approximately 80~90% of global trade volume is carried out through maritime transport, with a significant portion necessarily passing through a handful of canals and straits.
Therefore, major canals and straits are evaluated as representative "bottlenecks" in the global logistics network where alternative routes are limited.

2. Common Characteristics of Major Canals and Straits

• Structure where costs and time increase dramatically when detouring

  In case of not being able to pass through major canals and straits, alternative routes stretching thousands of kilometers have to be used.
  As a result, there is an increase in the sailing days, a rise in fuel costs, and a decrease in the fleet turnover rate, which in turn leads to higher freight rates and supply chain delays.

• Highly sensitive segments where logistics risks are escalated immediately

  The main canals and straits are segments that have physical constraints such as width, depth, and transit capacity, or are directly affected by geopolitical, climate, and security issues.
  Therefore, when incidents, disputes, climate change, and policy changes occur, their impact quickly spreads throughout the global logistics market.

• Strategic chokepoints where national, industrial, and energy logistics converge

  Major canals are more than simple routes; they are channels where key industrial cargo such as energy (crude oil, LNG), raw materials, and finished products are transported. Because of this, governments and global corporations continuously manage and monitor major canals from economic, security, and supply chain strategy perspectives.
  These waterways are more than just transit routes; they are strategic pathways where key industrial cargo such as crude oil, LNG, energy raw materials, and finished products are converged.
  Due to this, governments and global companies are continuously managing and monitoring major canals and straits from economic, security, and supply chain strategy perspectives.

3. The Reason Why Major Canals and Straits Become “Logistics Benchmark Information”

The main canals have a direct impact on the following key variables depending on which route was chosen.

• Lead time

• Shipping cost

• Freight volatility

• Risk exposure level

In other words, major canals and straits are not just geographical information, but serve as key variables that determine global logistics strategies and network designs, as well as the starting point for decision-making.

4. Characteristics of Five Major Canals and Straits

4.1 Suez Canal

[Image of the Suez Canal]

Location

• Artificially constructed maritime canal located in northeastern Egypt, connecting the Mediterranean Sea (Port Said) ↔ Red Sea (Red Sea)

Length

• Approximately 193.3 km

Logistics Characteristics

• The fastest sea route connecting Europe ↔ Asia without detouring around the African continent, significantly reducing sailing distance and time, thereby increasing logistics efficiency

• Approximately 12% of global maritime trade volume passes through the Suez Canal

• It is estimated that about 30% of global container cargo traffic uses this route ^[1]

• Passage through the canal is very frequent, with tens of thousands of ships traveling from around the world each year to transport various goods, raw materials, and energy resources

• The canal toll is an important source of revenue for the Egyptian government, demonstrating that it is infrastructure of great economic and strategic value beyond just a physical passage

Current Key Points

• Geopolitical and security risks directly impacting logistics flows

  In recent years, there have been reports of a significant decrease in canal traffic due to attacks in the Red Sea region by Yemen's Houthi rebels and others, with some vessels choosing to detour around the Cape of Good Hope. This has affected various aspects of the global supply chain, including freight rates, transportation costs, and lead times.

• Canal traffic volume and Revenue fluctuations possibility

  According to an AP news report, the Suez Canal traffic in 2024 decreased by about 50%, and canal revenues also dropped significantly.

• Signs of recovery in the global trade network

  In 2025, due to the stabilization of certain regions and the results of agreements, there has been a movement of carriers gradually resuming the use of the Suez route. ^[2]

• Challenges in generating alternative routes

  There is no alternative route to the Suez Canal, and detouring would result in a significant increase in lead time and costs, such as diverting around the Cape of Good Hope in South Africa. ^[3]

4.2 Panama Canal

[Image of the Panama Canal]

Location

• Located in the Panama Canal Zone in Central America, it is a man-made canal connecting the Atlantic (Caribbean Sea, Colón) ↔ the Pacific (Balboa)

Length

• Approximately 82 km

Logistics Characteristics

• The Panama Canal is utilized as a key route that shortens the Asia ↔ U.S. East Coast, U.S. West Coast ↔ Europe and South America routes, and is particularly important for the transport of U.S. East Coast import cargo, grain, energy, and container cargo.

• A freshwater canal lock, rather than a sea-level canal, requires a large amount of freshwater (Gatun Lake) for each vessel passage → In other words, precipitation and climate conditions are directly linked to navigational capacity.

• Ultra Large Container Vessels (ULCV) cannot pass, so carriers must strategically consider the possibility of passing through the Panama Canal when designing vessel sizes and trade lanes.

Current Key Points

• Drought-related passage restrictions is “Structural Risk”

  Due to the El Niño phenomenon between 2023 and 2024, reduced rainfall in the Central America region led to a decrease in Gatun Lake water levels, limitation of daily transit vessel numbers, and limitation of loading weight per vessel (draft restriction). This is assessed as a climate-based structural risk with the possibility of recurrence rather than a temporary issue.

• Transit restrictions → Increased uncertainty in schedules and costs

  When transit slots are limited, increased waiting times and the soaring costs of transit slots through auctions make the Panama Canal a variable that has a greater impact on “delivery reliability” than on freight rates.

• It takes time to fully recover

  The Panama Canal Authority (Autoridad del Canal de Panamá, ACP) has stated that, despite the recovery of rainfall, a phased operation is inevitable until full normalization is achieved. Accordingly, the Panama Canal is currently evaluated as a strategic bottleneck that requires the comprehensive consideration of climate, water resources, and policy.

4.3 Strait of Malacca

[Image of the Strait of Malacca]

Location

• Located between the Malay Peninsula (Malaysia and Thailand) and the Indonesian Sumatra Island, it serves as a key maritime route in Southeast Asia, connecting the Indian Ocean ↔ Pacific Ocean (South China Sea).

Length

• Approximately 800 km

Logistics Characteristics

• Considered one of the most important maritime chokepoints in the world, it is reported that more than 94,000 vessels pass through annually, carrying about 25% of global trade. ^[3]

• There is a strategic assessment that more than 80% of China's crude oil imports pass through the strait. ^[4]

• According to data from the U.S. Energy Information Administration (EIA), among others, the Strait of Malacca is identified as a key route for the transportation of oil and energy to major Asian markets (China, Japan, and Korea). ^[5]

Current Key Points

• High “Irreplaceability”

  If the Strait of Malacca is blocked or its passage is restricted, vessels must detour through the Sunda Strait or the Lombok Strait, significantly increasing route distance, operation time, and fuel costs. ^[6]

• Regular maritime security management

  The Malacca Strait has repeatedly experienced incidents of piracy/armed robbery/vessel approach accidents since the past. Recently, with the strengthening of joint patrols and surveillance by coastal countries (Malaysia, Indonesia and Singapore), large-scale pirate incidents have decreased, but from an insurance and operational risk management perspective, it is still classified as a “high-risk area.” ^[7]

• Directly linked to geopolitical and energy risks

  The energy flow between the Middle East and East Asia is concentrated in this strait, making the Malacca Strait one of the first strategically important locations mentioned whenever issues such as Middle East conflicts, global energy price fluctuations, or US-China strategic competition arise. ^[6]

4.4 Strait of Hormuz

[Image of the Strait of Hormuz]

Location

• As a key maritime route, it is located between Iran and Oman (Musandam Peninsula), in the Middle East region, connecting the Persian Gulf ↔ Gulf of Oman ↔ Arabian Sea.

Length

• Approximately 167km

Logistics Characteristics

• The only maritime outlet for Middle Eastern oil-producing countries, a key energy gateway for the export of crude oil, petroleum products, and LNG

• According to the U.S. Energy Information Administration (EIA), as of 2023, an average of over 20 million barrels of oil and petroleum products pass daily, which is estimated to be about 20% of global oil consumption. ^[8]

• The strait transit is constantly carried out, serving as a continuous route for energy vessels traveling from the Middle East to Asia (China, Japan, Korea and India), and plays a pivotal role in the international energy supply chain.

Current Key Points

• High “Strategic focus”

  The Strait of Hormuz has practically no alternative routes. Although there are some oil pipelines (such as Saudi Arabia's East-West Pipeline, UAE Habshan–Fujairah Pipeline, etc.), they are limited in replacing the total export volume. If the strait is blocked, there is a very high possibility of a sharp increase in global crude oil and LNG prices. ^[9]

• Continuous military and maritime security tension

  Cases of tension between the Islamic Revolutionary Guard Corps (IRGC) of Iran and the US-UK navies are recurring. Additionally, there is a history of incidents such as tanker seizures, drone attacks, and mine threats, making it a representative area where global insurance companies apply war risk insurance premiums. ^[10]

• Geopolitical risks directly linked to energy prices

  Middle East conflicts (Iran–US, Iran–Israel, Yemen Houthi rebels issues, etc.) directly affect international oil prices, and indirectly affect global inflation, sea freight rates, and aviation fuel prices. In particular, they are directly linked to the energy security of major Asian importers (Korea, Japan, China and India). ^[11]

4.5 Bab el-Mandeb Strait

[Image of the Bab-el-Mandeb Strait]

Location

• Located between Africa's Djibouti and Eritrea and Yemen on the Arabian Peninsula, serving as a maritime gateway connecting the southern Red Sea to the Gulf of Aden

Length

• Approximately 30 km

Logistics Characteristics

• According to the U.S. Energy Information Administration (EIA), as of 2023, an average of approximately 8.8 million barrels per day (b/d) of oil and petroleum products pass through, making it one of the major chokepoints in global energy maritime transport. ^[8]

• A significant portion of container traffic between Europe and Asia passes through this route, and any disruption in the Red Sea route directly affects global freight rates and lead times.

Current Key Points

• Strategic passage directly connected to the Suez Canal

  The Bab-el-Mandeb Strait serves as the "southern gateway" to the Suez Canal. If this segment is blocked, ships must detour around the Cape of Good Hope in Africa, leading directly to surges in fuel costs, insurance premiums, and freight charges. ^[8]

• Focal point for the recent Red Sea risk

  Global carriers have temporarily suspended operations on the Red Sea route or chosen to detour around the Cape of Good Hope, leading to an increase in war risk insurance premiums. Additionally, there have been cases of a surge in the SCFI and freight rates to Europe. ^[12]

• Associated with energy and food supply chains

  This is the main passage transporting the Middle East crude oil and refined oil to Europe, and their strategic significance has grown amid the reorganization of energy flows following the Russia-Ukraine war. They also indirectly impact the maritime transportation of grains and raw materials. ^[11]

5. Key Insights

✅ Major canals and straits are not just shipping routes, but strategic benchmark infrastructures that determine freight costs, lead times, and supply chain risks.
✅ The Suez Canal, the Panama Canal, the Strait of Malacca, the Kiel Canal, and the Corinth Canal each have different roles and spheres of influence, and it is necessary to understand the distinct characteristics of each canal.
✅ When data-driven monitoring and risk-based management are combined, major canals and straits can be transformed from bottlenecks into strategic options.