If the current civil unrest in Egypt forces the closure of the Suez Canal, ocean shipping lines would be able to absorb most of the shock of diverting Asia-Europe shipments around the Cape of Good Hope by increasing vessel speeds.
“Closure of the Suez Canal tomorrow would not be a train smash,” Drewry said in its latest Container Insight Weekly.
It said there is enough spare vessel capacity to enable carriers to divert the 24 weekly Asia-North Europe services around the Cape instead of through the Suez Canal in both directions, but this would trigger a fall in productivity of up to 17 percent because it would take 12 ships to provide the same weekly service capacity as 10 ships using the Suez Canal, if the speed remained the same.
As a result 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. This would result in an enormous increase in fuel costs on a route that is already suffering from flat demand and break-even results, at best.
The resulting disruption in supply chains would throw businesses in Europe dependent on goods from Asia, Australasia, the Indian subcontinent and the Middle East into turmoil.
It would also disrupt the recent shift by carriers of shipments from Asia to the U.S. East Coast on larger, more fuel-efficient ships via the Suez Canal instead of the money-losing Panama Canal route.
The two-way trade between the Far East and Europe accounted for approximately 20.1 million 20-foot-equivalent units last year, compared to 5.2 million TEUs between the Indian subcontinent, the Middle East and Europe, and 688,000 TEUs between Australasia/Oceania and Europe.