Whither shipping?

Ships avoiding the Suez Canal pose a threat to Malta’s transshipment business.


I have been told by executives in a number of shipping companies that more and more of the Asia/Europe trade is being routed round the Cape of Good Hope, taking the long route round Africa rather than the shorter Suez route. This is intriguing: it is, in effect, a reversal of all trends since Suez was reopened.
The logic for the shift is impeccable. First, piracy. Somalia has no stable government and few opportunites to earn a living: Somalis have taken to piracy in a big way in response. You can’t be surprised: ransom for a large, high profile ship can run into the millions of dollars.
Now Somalia is strategically placed: on the Horn of Africa, it dominates the approach to the Red Sea and the Suez Canal. The problem becomes clear now: if you avoid the Somali coast, then Suez is out of reach.
With high oil prices, the cost of the longer journey was prohibitive. But then oil – and with it the bunker prices for the fuel ships actually used – collapsed. The longer route now became viable.
Note that some shipping lines, in an effort to keep their ships moving with less cargo to carry, chose to slow their ships down. Longer rotations means the same number of ships carry less freight. This does not apply to the majors, as far as I know. But still.
As an executive of one shipping line told me, one of the reactions to the high cost of fuel was to slow ships down. The trend had been to get freighters (for which read bulk carriers, container vessels, tankers, et cetera) to move faster and faster. But a lot of cargo is not necessarily time sensitive: slow it down, you make considerable savings on fuel and many of the shipping industry’s clients proved willing to wait if it saved them money.
Piracy is now being tackled, with military escorts through a corridor in the straits between Yemen and Somalia and patrols in the western reaches of the Indian Ocean. As events over the past few days have shown, this has not stopped it. Piracy is still a threat, but not as much as it used to be.
The second reason is stranger. I have been told by shipping executives in Malta that the transit rates through the Suez have been raised. This, they say, is driving ships away and onto the long, circumafrican route.
It would, I suppose. There is one problem: I can find no reference to this on the Suez Canal Authority’s website, and have as yet had no answer to an email to them. There is, of course, the statement the Authority made, committing itself to not raising rates this year.
The truth remains that traffic through the canal has dropped, and the main reason for that is not piracy or the price of oil, or even the rates: there is simply less trade to go round!
However this plays out, though, less traffic through the Suez is bad news for Malta. We live on trade, and have leveraged our position – astride the main shipping lanes from Suez to Gibraltar – to establish a tidy transshipment business. But if the main East-West lines start bypassing the Med, that is at risk. And with it, the favourable rates Maltese importers and exporters obtained by piggybacking on this high-volume traffic.

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