Major freight firms, including Europe’s CMA CGM, Maersk and Mediterranean Shipping, as well as Chinese state-owned giant Cosco and Taiwan’s Evergreen Marine, have suspended transits through Egypt’s Suez Canal, according to media reports.
The 193km (120-mile) canal, which is one of the world’s busiest waterways and the shortest shipping route between Europe and Asia, accounts for 12 per cent of global trade, including 30 per cent of all container movement, according to Egypt’s State Information Service.
Taking the alternative route via the Cape of Good Hope would add around 10 days to the westbound trips on the Asia-North Europe route, and lead to further spikes in shipping costs, according to industry insiders.
Egypt has a significant commercial interest in the functioning of the Suez Canal
“It will all depend on how navies take this up,” said Christian Roeloffs, co-founder and CEO of Container xChange, an online container logistics platform.
“Egypt has a significant commercial interest in the functioning of the Suez Canal as it is one of the main revenue drivers and if the diversion happens then it will have a significant impact there.”
The Suez Canal Authority said on Sunday that 55 ships have diverted via the Cape of Good Hope since November 19, while 2,128 ships had travelled through the waterway during the same period.
“We are closely monitoring the impact of the current tensions in the Red Sea and studying their impact on navigation via the canal,” Suez Canal Authority chairman Osama Rabie said in a statement.
But Roeloffs said that while the traffic in the Suez Canal and on the Red Sea looked healthy, it could turn around very quickly.
“If we go by history, then the situation of the Ever Given did create a lot of traffic jams a few years ago, the repercussions of which were felt for months,” Roeloffs added.
Ocean rates between China and Europe had already been on the rise in the recent months, reflecting a traditional uptick at the end of the year as Chinese exporters rush to send out goods ahead of Lunar New Year and ocean carriers push up prices during long-term contract negotiations.
The spot rate for sending a 40-foot container from China to the Mediterranean increased by over 70 per cent in the past month to US$2,414 as of Friday, according to the Freightos Baltic Index.
The rate for routes from China to Northern Europe also increased by 55 per cent compared to a month earlier to US$1,467, the index showed.
But despite the increase in shipping prices, Chinese exports to Europe have remained subdued recently amid weak demand.
Rail routes between China, Europe go off track as freight operators skip Russia
Rail routes between China, Europe go off track as freight operators skip Russia
The intercontinental railway network, which serves as an alternative to sea and air freight, has been shunned by European traders since the Ukraine war began due to fears of sanctions or of being perceived as friendly with Russia – which is an unskippable part of the all rail routes.
“In fact, there is no need to worry too much about the extra 10 days for ships to go around the Cape of Good Hope,” Mo said.
“Judging from the current high inventory level and weak consumption in Europe, [the disruption in Red Sea] will not cause another exponential growth in demand for China-Europe freight trains, like the one in 2021.”