Business as usual in the Suez…for now

Analysts note that the Suez is a vital cargo thoroughfare for goods transiting from Asia to Europe, North America and Western Africa. Egypt’s Red Sea and Mediterranean ports are growing in regional significance.

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As news reports continue to track the transit of two Iranian warships through the Suez Canal, global shippers may also be ready to rethink their supply chain strategies.

“So far, we have yet to learn of any disruption in the Canal,” said Anne Marie Kappel ?Vice President ?World Shipping Council in Washington. “Container vessel operators continue to deploy shipments and it’s business as usual.”

According to Kappel, the Egyptian government has the authority to permit the warships to complete their journey to Syria, and Council constituents have not voice their concern over Israeli interference…yet.
“Obviously, everyone is monitoring the situation, but we don’t see any immediate reaction among shipping companies.”

Last week, however, A.P. Moller-Maersk closed its Suez container terminal for two days and DP World suspended operations near Cairo as mass protests continued to rock Egypt’s capital. Furthermore, Hanjin Shipping began re-routing vessels last week from Port Said and Alexandria.

Analysts note that the Suez is a vital cargo thoroughfare for goods transiting from Asia to Europe, North America and Western Africa. Egypt’s Red Sea and Mediterranean ports are growing in regional significance.

Even before Israel raised the threat of an armed reaction to the news, analysts told LM that a potential closure of the Suez caused by civil unrest in Egypt would have a serious impact on container shipping.

Although a closure of the Suez canal is improbable, the risk of a disruption of vessel traffic in the canal cannot be totally excluded, said Alphaliner, a Paris-based consultancy.

This would have a huge impact on container shipping which represents the largest vessel segment currently transiting the canal, analysts added.

Containerships currently account for 55 percent of the net tonnage and for 38 percent of the total number of vessels transiting the Suez Canal. The high tonnage share of the containership transit is due to the larger size of container vessels that pass the canal compared to other vessel types.

Currently there are at least 56 affected containership strings. By far the majority of these are weekly services. Out of the total, 46 strings concern Far East-Europe services. In other words, about seven or eight containerships transit the canal every day in each direction.

Should the situation worsen, the most obvious alternative would be to re-route ships via the Cape of Good Hope. This would mean a much longer journey and such a decision might be weighed against the prospects of seeing the canal reopen soon.

Alphaliner noted that the distance between Singapore and Rotterdam, for example, stands at 11,800 nautical miles via Cape of Good Hope against 8,300 nautical miles via the Suez.

Analysts also that additional seven days of 20 knots steaming (one way) and a much higher fuel bill, would be the likely consequence for shippers.

www.alphaliner.com


About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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From the January 2018 Logistics Management Magazine Issue
Industry experts agree that costs across all sectors worldwide will continue to rise in 2018, and the most successful shippers will be those that are able to mitigate their impact on profitability. And, the right technology will play an increasingly vital role in driving efficiencies across the global logistics network.
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