Suez dominoes stretch to Southeast Asia
Egypt's political unrest in late January and early February had immediate effects on ocean container shipping.
Container lines had to suddenly account for ports that were shuttered, shifting cross-Suez calls at Egyptian transshipment ports to nearby replacements in the Middle East and Mediterranean. By all accounts the problems didn't affect Suez Canal transits, but there's an interesting hypothetical to consider: what if there are long-lasting ramifications in Egypt that affect how the Suez Canal is governed?
Keep in mind, Egypt has been the bulwark of stability in the Middle East for decades, acting as an ally to the West and Israel and as a force for moderation. Whatever government takes over will control the Suez, and thus the key waterway connecting Asia with Europe and the U.S. East Coast. And it's not as though it hasn't been shut down before. From 1967 to 1975, the canal was blockaded by Egypt following the Six Day War with Israel.
The area likely to be most affected by any disturbance to the Suez, from a North American perspective, would be Southeast Asia. That's because Southeast Asia has the most flexibility in routing of cargo to North America. Anywhere east and it really only makes sense to go via the transpacific. Anywhere west and the Suez makes the most sense.
But carriers can tailor rotations with more creativity from Southeast Asia itself.
American Shipper research affiliate ComPair Data shows 13 services directly linking Southeast Asia to North America. Eight call only at West Coast North America ports, four call only at East Coast North America ports and the remaining one calls at both. Six of those services sail only on the transpacific, four only via the Suez, and three use both. Not a single service from Southeast Asia goes transpacific all-water to U.S. East Coast ports, reinforcing the point that Southeast Asia is the veritable Mason-Dixon line for North America shipments.
Also, no services from Southeast Asia to the East Coast of North America sail around Africa via the Cape of Good Hope (the only real alternative to transiting the Suez).
That there's slightly more use of transpacific services and West Coast North America ports reflects the faster transit times available. The CKYH Alliance's SJX service connects Cai Mep in Vietnam with Long Beach in 16 days (and that's with calls in Hong Kong and Japan in between). Via the Suez, the fastest Southeast Asia/North America transit time is 19 days with no stops in between.
When considering which route to use, an intermodal shipper in the U.S. Midwest would have to dissect how fast its goods could move on the inland side, and whether those three days can be made up if using the Suez routing.
But the unrest in Egypt would add a new wrinkle to the discussion.
The purely transpacific services face no threat of canal transit delays, port closures or rotation adjustments. The Suez services do, as do the three that go trans-Suez and transpacific (incidentally only one of the four Suez services calls at an Egyptian port ' Maersk Line's long-line TP6/AE6 service, which calls at the transshipment hub of Port Said).
Again, as of early February, the canal was reported to be operating as normal. It's also governed by international treaty that allows free passage of commercial vessels in time of war and peace. But for argument's sake, isn't it at least worth asking whether unrest, coupled with piracy in the Gulf of Aden, could force carriers to rethink their shipping patterns, at least temporarily? After all, contingency planning is a necessary device in any carrier or shipper's supply chain toolbox.
The three services that use the Suez and transpacific offer especially intriguing examples.
The Grand Alliance's Loop B long-line service, run with 17 Hapag-Lloyd vessels, connects northern Europe and the Pacific Northwest via the Middle East and Far East. The service can be thought of as two distinct loops, an Asia/Europe loop and transpacific loop, with a fulcrum in Singapore.
If there were continued disruptions in the Middle East and problems transiting the Suez, would Grand Alliance carriers consider splitting the loops so potential problems on the Asia/Europe leg wouldn't affect the transpacific leg? The service doesn't aggressively slow steam in any one leg, so it might be difficult to make up lost time on a service that calls so many ports.
Maersk and CMA CGM's 15-ship TP3-TP9/Columbus service, which covers both North American coasts without a Panama Canal transit, is another example. The service goes express from Tanjung Pelepas to New York via the Suez, then slow steams back to Tanjung Pelepas from Savannah, where it becomes a traditional-looking transpacific service to the Pacific Northwest.
The express link from Malaysia to New York would be compromised by problems on the Suez, and one could envision the lines splitting the Southeast Asia/U.S. East Coast leg from the Southeast Asia/China/Korea-to-Pacific Northwest leg.
Likewise, Maersk's previously mentioned TP6/AE6 service also uses Asia as a pivot to cover the Mediterranean on one side and Los Angeles on the other. Perhaps problems in the Suez could make it preferable to segment the services back to their TP6 and AE6 root services? At the very least, prolonged trouble in Egypt might compel Maersk to switch out the Port Said call for one at a different Med transshipment hub.
Beyond ocean services, trouble on the Suez could stimulate movement for other grand projects long mooted in Southeast Asia, like a canal through southern Thailand that would eliminate the need to sail through the Malacca Straits (which battles its own piracy problems). That canal, projected to cost about $30 billion, could marginalize Singapore and Malaysia as transshipment hubs in the region and make sailing transpacific routes more attractive. A pan-regional rail network through Southeast Asia, feeding ports in Vietnam, could also tilt the balance toward the transpacific.
These are all, of course, grandly hypothetical. The type you see in dire think tanks warnings about future instability in the Middle East. They deal with questions of trade routes that have existed for centuries. And they certainly aren't meant to second guess the decisions, nor the reactive abilities, of individual lines. Carriers undoubtedly develop contingencies. One would imagine that, if needed, they would be ready to circumvent the Suez by sailing around the Cape, just as they began to do when Suez Canal tolls soared too high recently.
As Francis Phillips of ComPair Data cautioned me: 'I think in the short term there will not be much that shippers can do about a disruption and then after that life would go on as normal. All the carriers would be affected in exactly the same way as each other and their options would be broadly similar.'