Commodity routes, and the risks that surround them

This time, host Tim Phillips is joined by regular guests Aastha Gupta and Scott Livingstone to talk about the world's most vital trade routes – from what goes through them to what happens around them. 

They also discuss potential new trade routes and which countries may lay claim to them, as well as discuss that age old question: what issues are being overlooked, but which might be on all of our lips by the time of the next episode?

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This episode was recorded on 1 October 2025.

All details correct at time of recording.

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Transcript

Welcome back to Trade Links brought to you by Nat West. My name is Tim Phillips. And welcome back to our regular panel. 
That means Aastha Gupta, European economist, economics and market strategy at NetWest Markets. Hello again, Aastha. Hi, Tim. 
And also Scott Livingstone, International Advisor for NatWest Group. Hello again, Scott. Tim, good afternoon. 
We've mentioned it before. on trade links. There are a few routes in the world that are a nexus for commodity trade. It's hard for us to comprehend the volume of goods that float through these points, or indeed the damage to the world economy, if that flow was choked off. 
Well, numbers, geopolitics and potential disaster, this sounds like a job for Astor and Scott. So our topic today is commodity trade routes. As to the big question, 1st of all, what are these routes? 
What are the main routes we're discussing here? Well, if you're picturing the arteries of global trade, I think it's the big three. The Suez Canal, the Panama Canal, and the Street of Melaka, because these are the roads where the majority of global shipping traffic flows through and disruption here, even for a few days, throws of supply chain, delivery schedules, and even price stability around the world. 
So take the service, for example, it handles about 12 to 15% of global trade. The straight of Melaka is even busier, it's the lifetime between China, Japan, and the Indian Ocean. And then there's the Panama Canal, which links the Atlantic and the Pacific, and it's key for goods moving between the Americas and Asia. 
If one of them gets blocked, it's really like shutting down on major airport, wherein everything gets delayed and costs pile up fast. Now, I did say it's hard for us to comprehend the scale of trade going through this. It's hard for me is what I really mean. 
So please help me out, Asta. How much trade is flowing through these routes. So when it's business as usual. 
We have no droughts, no attacks or no delays. These routes carry 100000000s of dollars in goods every year. Through the Swiss Canal, you've got energy, electronics, machinery, chemicals, and more than $100000000 in goods passed through it every year. 
So the Panama Canal is essentially important for grains, fuel, and containerised goods between Americas and Asia. If we zoom in in a bit, about 30% of global container traffic flows through the Suez, roughly 6% of global maritime trade moves through the Panama, and it handles 40% of US container traffic alone. And if you look at the state of Melaka, It handles around 25% of the traded goods, including massive volumes of oil, liquified natural gas, and manufactured goods. 
And on some estimates, over 15000000 barrels of oil per day passes through it. So these aren't just busy shipping lanes, they're the conveyor belts of the global economy. The Straits of Melaka 25% of all traded goods. 
Scott, are the less known routes, though, that are also strategically important. Well, Tim, I'll come on to a less well-known route, but I think if Aster has listed to top 3, I've got to add the 4th because it's so geopolitically important, and that's the straits of hormones between Oman and the Emirates and Iran, it connects the Persian Gulf to the Gulf of Oman and the Arabian Sea, and then onwards towards China, India, Japan. And it really is the exit point, the C exit point for most of the golf countries, and pretty much all of Qatar's natural gas passes through it, 20% or so of global oil pass through the Straits of Hormones. 
But the reason I'm raising it is because geopolitically it is a current live point of tension, given the geopolitical issues around Iran and Iran's nuclear programme. In some observers, which I agree with, suggest it is a RAN's last point of geopolitical leverage after the recent action where the other geopolitical levers have all been destroyed or significantly weakened. So if we do see a rise in Jupiter political tension with Iran, then all of the focus on the scenarios, the consequences will centre around the streets of her moves and the interruption to those oil and gas supplies. 
But you ask for something which is less well known, but also important. Here I'm going to introduce land roots. So far we've been speaking about sea routes and sea transport, but obviously the implication is they bring choke points and they bring vulnerabilities and therefore there is an effort to generate land routes and the Chinese belt and road initiative for some time now has been developing routes across Eurasia. 
And there's a variation of this, the Belton road routes, which is called the middle corridor. And again, it links China through the Central Asian Republics and in towards Europe. But importantly, it doesn't go through Russia. 
And so I think we pay attention to this new route. It is under construction. At the moment. 
There are areas that are still to be finalised, but that is something to look out for the future and it will bring strategic benefit to linking Asia with Europe. And then finally, there's an interesting variation on this route, Tim, which is the Zangizur corridor, and it links Azabyan, Turkey. And I think that's a shortcut on this route, which runs through a recent area of geopolitical conflict. 
Now there is a peace process, but this corridor is seen as one of the positive outcomes of that conflict in Azerbaidzhan. You mentioned this to me before and I'm ashamed to admit to you. I had no idea where it was, so I had to go and look it up. 
Don't tell anyone about it. But when you see where it is. You can really understand how important it is. 
Aster did qualify what I asked her when I was talking about the volumes of goods that go through these corridors. She said, when it's business as usual, Scott, for all of these roots, is it business as usual? I mean, us is quite right to bring all of these rules. 
And particularly since President Trump has come to par, President Trump seems to have brought a laser focus on the viability of trade, conducting geopolitics very much through the lens of trade, and then very much through the lens of critical trade, vital goods that must be supplied for the American national interest. And that's where we end up with tensions around the Panama Canal. That's where we end up with the ongoing tensions in the South China Sea, which point towards the streets of Melaka. 
As I just mentioned, the streets of Hormuz with the tensions with Iran. We've also seen President Trump declare a peacemaking role in the Armenian Azerbaidzhan conflict. It's one of his 7 conflicts that he claimed at the United nations recently that he has solved. 
And an interesting little side bit to that one. He was very quick to move onto the trade route after declaring his role in that peace process. And in fact, that corridor, that Zhangzinar corridor, has been renamed the Trump root for international peace and prosperity. 
So he really is putting his stamp on this potential new trade route and the benefits that come from the construction that come from the licensing and of course come from the trade itself. So these are all geopolitically important. They're all geopolitically live to greater or lesser degree. 
And as we see conflicts, as we see tensions and competition rise, you can expect to see pressure put on all of these trade routes. The Trump route for international peace and prosperity. I am hoping that there will be a giant sign at each end of it. 
Astor, always, you have the data at your fingertips. In the Red Sea, when we've had these recent conflicts. It is not business as usual. 
What has that done to the flow of goods? It's been a major shock to global shipping. Since the Hoot heat attack, started picking up in date 2023. 
Traffic through the Red Sea and the Swiss Canal has dropped dramatically. At the worst point, container ship activity fell by over 70%. And by mid of this year, it was still down by around 40 to 50% compared to normal. 
And what we've seen is that a lot of big shipping companies chose to reroute vessels around the Cape of Goodhoe, which added anywhere between 10 to 14 days to the journey and can cost up to $1000000 more per trip in fuel and insurance alone. And for Europe, all of this matters. Because a huge portion of goods from Asia, including electronics clothing, machinery usually comes through that road. 
So when traffic slows down, you start to see longer late times, higher shipping costs, and possibly even upward pressure on inflation in thumb markets. And it's basically a textbook example of how geopolitics bleeds into economics. Also, I learnt the Panama Canal has had problems. 
But those problems have not been conflict on either side of it. This has been drought. What has been happening there, Aster? 
How big a problem is this? I mean, this is one of the climate related stories that doesn't get enough attention. The Panama Canal relies on rainwater fed lakes, who operates its lock system. 
It's not just really a waterway. It's a freshwater elevator for ships. But what we saw that with the drought in 2023 and early 2024, rainwater fell, hit roadie record lows. 
That meant that the water levels dropped so much that the canal authority had to limit the number of ships and the weight of the vessels that were allowed through. So at one point they cut the theory transrits from 36 to just 22 ships per day, which is a big deal when you're handling over 5 to 6% of global trade. And some ships had to offload containers to make it through. 
Others got stuck in week long queues, and many just rerouted. Trade through the Panama Canal, dropped by about 30% year on year early last year. And that triple effect spread. 
We saw that the green prices sticked up, fuel routes got reshuffled, and insurance premiums also went up for certain voyages. And it's a reminder that climate shocks can also act like economic shocks. I live by canal. 
There is a lock about 50 metres from where I'm sitting now and you forget that that is multiplied many, many times over the Panama Canal and how important that is. That is remarkable. And as you say, very underreported. 
I have a hot take here. Climate change. Not all bad. 
I understand that there are arctic roots potentially opening up. Aster, where are these arctic roots? Why are they important? 
I think this is the part of the conversation that feels like science fiction is slowly running into reality. So Arctic routes, especially the northern sea route, which is the northeast passage along Russia's northern coast, they are becoming viable as sea ice melts. So in theory, this route could shave off about 10 to 15 days off the trip between Europe and Asia compared to going through the Suez Canal. 
So in 2024, we saw a record number of transit verges through this route, 97 ships made the full Arctic passage, moving about 3000000 tons of cargo. Of course, that's still very small compared to Suez or Panama, but it's still growing. Russia's investing heavily in new ports and icebreaker fleets to support this routes. 
But it's obviously not without complications. I see, yes, there is huge potential if done carefully, but the complications are such like the season could be still short. ice conditions can be unpredictable, and geopolitical risks still persist. So if current 2 stay unstable, and the climate change keeps shifting. 
The Arctic roots could just become more than just a backup. Not without complications. Scott, is the ownership of the Arctic clear? 
Who owns these routes? No, that's enough, and not without complications. a wonderful understatement. And then asked this point about geopolitical tensions are in place. 
I think they're just beginning, to be honest with you. I think this will be a theme that we will add to. to our list of geopolitical tensions in the coming years. The Europeans and Americans have woken up, frankly, to the potential of this northern sea route, not just in trade terms, but in military terms as well. 
And they think they've also woken up to the fact that Russia does have this built-in, the moment advantage in terms of ports, and as Aster says in terms of nuclear powered icebreakers, for example, they vastly outnumber the fleet from the West. So there is a response happening now. NATO countries are building new vessels, are planning to build new vessels, and metaphorical flags are being stuck into bits of land saying that this is Norwegian or Canadian or whatever. 
And we are seeing comments from President Trump again, if you recall his comments on Greenland, part of that, the geographical position of Greenland regarding this northern route. So I think we're at the beginning of the beginning in terms of geopolitical tensions over the northern sea routes. I think they will continue, and I think at the core of it is the question you ask is whether these waters particularly around Russia are Russian waters, or whether they're international, and at the moment there is no agreement on answering that question. 
I look forward to the announcement of the Trump very cold route through the Arctic. Thank you very much for that discussion about the roots. I think we ought to discuss a little bit more, about the commodities that go through those routes in a moment. 
Okay, so let's talk about some of these commodities because they are strategically important. And so I'd like to know how governments are responding to the uncertainty and a disruption around it. I'm going to ask you, it's a quiz show moment. 
I'm going to ask you to pick 2 each and talk about them. Astor, you go first. So coming straight off what we talked about earlier in the 1st section, about the disruption, the Red Sea and the Panama Canal. 
One of the biggest responses came from the US with its strategic petroleum reserve, where it released a huge amount of oil reserves to balance out the disruption that we saw. And what's significant here is the shift that we saw, where in the reserve isn't just for military emergencies anymore. It's being used as a shock absorber for global supply chain stress, especially when energy markets go haywire. 
Yeah, that has huge economic implications, doesn't it? Scott, what would you pick as your 1st one? Without doubt for me, the geopolitical commodity. 
Of the day of the year of the rest of this decade will be a set of critical minerals, and include what we now commonly call rare earth, 17 rear earth elements, but a broader set of critical minerals, that once they're refined, they play absolutely crucial roles in the future strategic technologies, both civilian and military. And this summary of the situation we have at the moment and the pivot of the geopolitical tension is that there is a monopoly of the extraction and very much the refinement of these minerals held by China. So we've got Chinese over the last few decades, have gathered together quite a number of concessions of the extraction of these minerals, but more importantly, they have absolutely cornered the market in the manufacturing of the refined minerals, which is an environmentally dirty process in many cases. 
So I think we're now in this position, again, as another example of geopolitics in the West, catching up with their true dependencies, and we're seeing a flurry of activity from countries in the West in the US, pretty much everywhere to generate new sovereign or reliable supplies of these minerals, but it will take time. And until that happens, then China has a very, very effective geopolitical lever to pull. And we are seeing it in action, Tim, in the current tops going on between the US and China. 
And so this is a highly effective geopolitical tool, and for the time being, for a number of years until the West figures out alternative supplies. This will shape Western relationships with China. We spent such a long time thinking about how do we get more trade flowing and how do we balance out supplies? 
For example, what Asta was telling us about the US reserves, and this is a reminder as well that actually what we need to think about is what happens when some country, some region corners the market in something. As to what's your 2nd example? My 2nd example is very much in line with what Scott said. 
I think it's around critical mentals because what you've seen at the governments are redrawing the commodity map to become more self-reliant and strategically secure. I mean, because they're reacting to longer term vulnerabilities in supply chains. So take Indonesia, for example, they used to export raw nickel ore, but after global shortages and the rising demand for electric vehicle batteries, they ban the exports, and now they require local mining and refining. 
And it worked. They're now key global supplier of battery grade nickel. Even Chile, which is doing something similar with lithium. 
And these moves are important because they show how governments are not just reacting to short term destruptions, but, you know, trying to get everything closer back to home. This is the sort of industrial policy that we didn't see for years and has now really come back and has become strategically important. Scott, what are you going to pick as your number 2 choice? 
Number 2 on, for me, it's interesting, and it's something which I'm looking into, we got a flavour of it during the COVID pandemic when there was a sudden surge for pharmaceuticals and PTE, et cetera. And I'm rather shocked to discover that the supply chain of the commodities that form the basis of our pharmaceutical, so active pharmaceutical ingredients, or APIs as they're called, the building blocks of these medicines. Again, there are concentrations of supply and those concentrations at the moment. 
The bulk of them are in China and India. Now the EU is in 3rd place, and the US does have a manufacturing capability, but it's some way down the chain. So really China and India have their hands on this leaf or should they wish to pull it? 
And I think if you were to ask any government about their critical supply chains, it wouldn't take too long before they said, well, this supply of medicines to the population. So I think this is a lever to look out for. It doesn't often feature, but it's there and it's there in the backs of minds when people are in negotiations. 
One more example of things that are not manufactured in the United States that we assumed were. Scott, bonus round. I think you've got one more thing you wanted to talk about. 
I would just remind everyone that there is another commodity, not often traded, certainly not yet, but nevertheless will become geopolitically important, and this is water. And I think it ties in many of the points we've said before and it brings in the climate crisis because I think this will be a sharpening geopolitical issue in the future. If you want an example, then I would draw your attention to Indian Pakistan after the tension, the crisis in May, and the Indian government declared that they were withdrawing or pausing on their participation in an agreement around the Indus water basin that feeds both countries, and furthermore, they were threatening, they may take measures to restrict water supply heading into Pakistan. 
The Pakistan government. This is existential. This is already a water stress country. 
And so their response was to say, well if that were to happen, we would treat that as an act of war. So here we have a direct correlation between the management of a commodity and then geopolitical relations and tensions. Today, we are all over the map, but I mean that in a good way. 
As I often say, I've got a feeling that we'll be following some of those up in future. Okay, so now we reach the point where you tell us what is on your agenda, Scott and Aster, what is something that you are thinking about that maybe we have not been thinking about yet? Aster? 
One story which has been very recent that might have clipped under the radar is the US crapping its $800 D-Minisment's threshold for imports. And this rule essentially allowed small exporters to ship low value goods into the US without customs red tape, especially which was useful for e-commerce. For now, even a $50 product faces full custom checks, added costs and delays. 
So for small firms, that's a big shift, and many are scrambling to adapt. And basically this is just a reminder that how even small regulatory changes can trigger supply chain reviving, especially when margins are tied. So for me, I think I'll be watching out if companies on the ground, do tie-ups within US to go around this exemption. 
Scott, what's on your agenda? Tim, in amongst all of the rather busy geopolitical scene, I'm still paying particular attention to the situation in Syria. And it's a really interesting issue in my opinion, for a country that I think really matters. 
At the moment, what we're seeing are attempts by the new Syrian government, led by Ahmed al Sharaf, a former jihadi terrorist, a designated terrorist, and external powers from America, Europe, and the Gulf, trying to encourage and enable the emergence of our new state, an inclusive, unified, and peaceful Syria after the horrors of the Bashara Assad regime that fell last year. So this week we've seen Al Sharad address the United Nations General Assembly, which was remarkable, we mustn't think that that indicates the job is done. He's facing incredible problems to keep this evolution happening. 
There are factionalism, there are severe economic hardships and obviously destroyed infrastructure after years of civil war. So this is a very, very fragile situation. But I think it matters because the neighbourhood frankly could do with some good news. 
And if it fails, and if we see Assyria consumed by civil war, then it not only dreadful situation for this for Syrians, but it will bring in external powers who will then pursue their own motors in and around Syria, so Turkey regarding the Kurds and Russia still has some bases in Syria, and Iran still has the remnants of some proxy organisations in Syria. And of course, the West, the Europeans and the Americans would be worried about jihadi terrorism on the rise in that part of the world. So there are big stakes at play here. 
It's a very fragile situation and the downside risk would be consequential, but the upside risk also would set a terrific example, I think, that countries in that part of the world can move to a better future can focus on stability and the economy and the well-being of the population rather than factional fighting. It's really worth bringing a pencil with you if you're going to listen to trade links because you'll want to make notes. Thank you very much, Scott. 
Thank you very much to add Aster as well. Thank you so much, John. And thank you to all of you for listening. 
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