The cost of narrowed arteries
Analyses and figures on the impact of growing bottlenecks on the oceans. 2024 has brought the expected turbulent start for the maritime shipping industry. Ferdinand de Lesseps’ global vision is being severely tested, because it’s not clear when the bottlenecks around the Suez and Panama canals will again allow the smooth flow of goods. The consequences of the longer routes that have become necessary are noticeable, with the experts predicting that they’ll worsen.
Unctad’s recent study of the maritime shipping industry, published in Geneva recently, reveals that the disruption of maritime trade routes through the Red Sea and the Suez Canal has an impact on trade flows worldwide. This development reinforces an already tense situation in the Black Sea too, due to the war in Ukraine, and at the Panama Canal, where it’s due to drought.
According to estimates provided by Unctad, transit traffic through the Suez Canal has fallen by 42% compared to its peak, and the weekly transit of containerships has fallen by an even more significant 67%.
In Central America, on the other hand, the number of crossings through the Panama Canal has fallen by 49% from its previous peak. Traditional maritime routes are shifting, established partnerships need to be redefined and new networks established. This takes time – and above all money.
From early in December 2023 to the end of February this year, the average spot rates for container traffic sailing from Shanghai more than doubled, growing by approximately 122%, and the spot rates to Europe almost tripled (+256%). Rates to the west coast of the USA have also risen disproportionately strongly (+162%) – although paradoxically these ships don’t even sail through the Suez Canal at all.
The overall effect of the change of routes away from Cairo towards the Cape of Good Hope in Southern Africa is striking. Copenhagen-based Sea-Intelligence has calculated the expected demand for teu-miles for the full year 2024. While the figure stood at 860 billion teu-miles in 2023, the same amount of freight would lead to demand for 994 billion teu-miles in 2024, assuming the same situation. This corresponds to an increase of 16%.
Each trade is naturally affected in very different ways. The focus is on connections from Europe via the Mediterranean to India and the Far East. According to Sea-Intelligence, traffic from India via the Middle East to North America is also affected, as are the routes linking East African countries to Europe. 34% of Sudan’s trade, 15% of Tanzania’s and 10% of Kenya’s trade are affected, according to Unctad.
Flexibility called for in every trade
Trans-Pacific transport is much less affected by higher rates, but the problems creep in through the back door there. The firm ‘Container xChange’, for example, has ascertained that container leasing rates on certain routes from China to the USA have increased threefold compared to November 2023. Leasing rates in February were almost 300% higher than in February 2023.
Experts naturally expect an impact on global fuel, energy and consumer markets, but aren’t in a position to estimate it yet. Especially the prices of gas and food are causing many headaches. The ecological impact has already seen some experts hazard approximations, however.
On the basis of the Singapore–Rotterdam route Unctad estimates that re-routing vessels around Africa can raise greenhouse gas emissions by 70%, due to the longer distances involved.