U.S. Inland Water Transport Remains Key—However Logistics Trends Go

When the COVID lockdowns ended, there was a flurry of hope that logistics would get back to “normal.” It’s now clear that the old logistics “normal” is gone forever—and for many more reasons than just COVID disruptions.

The U.S. is again facing a hotter and drier summer than usual, with lower-than-normal water levels on major river systems. The hot summer has again disrupted water transport across the northern hemisphere. China, where parts of the Yangtze River completely dried up last year in a record-smashing drought, faces another summer of record-breaking heat. Not only does drought in China disrupt water transport, it also reduces hydropower, which slows and snarls Chinese manufacturing and therefore affects U.S. imports.

Low water is again slowing traffic on Europe’s Rhine River, a key water artery. Vessels have been light-loading and imposing surcharges.

The Panama Canal Authority is facing “operational uncertainty” due to drought. It recently asked the U.S. Corps of Engineers (which built the Canal) for advice on a climate-related problem: not enough water in the  Alajuela and Gatun lakes to fully operate the locks, which use about 50 million gallons of freshwater for each vessel transition. The Canal has restricted passage for the largest ships five times this year. Some shippers are already rerouting larger vessels around the Canal, according to reports.

Cimate-related challenges aside, this year has also seen a threatened dockworkers’ action on the U.S. West Coast, and also on Canada’s West Coast. President Biden’s speeded-up green agenda, including proposed tailpipe emissions that will take effect in 2027, is designed to force-march drivers into an all-electric future—one that experts say the U.S. electric grid is not prepared for. The potential impacts on trucking are not yet fully known.

As all these risks to the supply chain become more apparent to shippers, some logistics experts are talking about a decline from the peak of huge ocean-going container vessels as rates and routes become unsustainable and shippers retrench.

Business and geopolitical analysts are talking about a massive reshoring of U.S. manufacturing, in which supply chains will be pulled in from around the world, shortened and simplified as manufacturing re-locates back to the U.S. According to the consulting firm Forvis, in late 2022 projections showed a record 350,000 jobs being added back to the U.S. A recent survey by Kearney Consulting reported that 96 percent of responding CEOs are considering reshoring their operations or have already done so. Experts debate about how fast reshoring is taking place and whether U.S. labor can meet the challenge.

What is interesting to us is that in every scenario being discussed, inland water transportation becomes more important than ever. In every possible transportation future, having a reliable inland waterways system that can take advantage of its ability to add capacity is of top importance.