Keeping watch on the Suez

As shippers continue to track the deteriorating political situation in Egypt, analysts are assessing the possible impact on Suez Canal services.

Recent civil riots in Port Said were, “arguably,” too close for comfort for those dependent on the Suez Canal, said Drewry’s Container Research – a London-based industry think tank. Although the arterial trade route is unlikely to close, the possibility cannot be ignored, analysts added.

According to Drewry’s calculations, there is enough spare vessel capacity to absorb most of the shock of sailing from the Far East to Europe via the Cape of Good Hope simply by increasing vessel speeds, which means that closure of the Suez Canal tomorrow would not be a monumental crisis.

Supply chain managers in Europe responsible for ensuring the smooth flow of goods after a catastrophic failure will be watching the escalating civil violence in Egypt closely, nevertheless.

To help put the importance of the Suez Canal into perspective, its two-way trade between the Far East and Europe accounted for approximately 20.1 million twenty-foot equivalent units (TEUs) last year, compared to 5.2 million TEUs between the Indian Subcontinent/Middle East and Europe, and 688,000 TEUs between Australasia/Oceania and Europe.

In the unlikely event of the gateway closing, businesses in Europe dependent on goods from Asia, Australasia, the Indian Subcontinent, and Middle East would immediately be thrown into turmoil, said Drewry.

Forcing each of the 24 weekly Asia-North Europe services to sail around the Cape instead of through the Suez Canal in both directions would trigger a fall in productivity of up to 17% (12 ships being necessary to provide the same capacity per week as 10 ships today, if the speed remained the same).

To continue providing the same capacity per week with a weekly frequency, carriers would collectively have to inject 48 additional ships into the Asia-North Europe services, or increase the speed of their ships, or a combination of both.

More on the Suez tomorrow.