New Drewry Website Highlights Impact of Sailing Cancellations

Continuing civil unrest in Egypt, particularly around Port Said, highlights Europe’s dependence on the Suez Canal remaining open, according to Drewry’s new online product Container Insight Weekly.

According to Drewry’s ‘what if’ calculations, were the Suez Canal to close tomorrow, Europe’s supply chains would be thrown into immediate turmoil, but it wouldn’t last long as there is sufficient surplus vessel capacity already operating between Asia and Europe to absorb the shock.

This is the conclusion of Container Insight Weekly’s next ‘Topic of the Week’ published on March 18, 2013.

According to Drewry’s research, the disruption could be overcome by simply increasing the average speed of vessels operating between Asia and Europe from 19k westbound and 15k eastbound to 22k in both directions. Because of the wide range of speeds used in different loops, the impact would be variable, but range from increasing westbound transit times from approximately 2.5 days to seven days with the same number of vessels deployed. Eastbound transit times would, in many cases, become more favourable to shippers, ranging from just one day longer to 3 days shorter.

The sting in the tail would be a mammoth increase in fuel costs, which would compel ocean carriers to raise a special bunker surcharge of between $200/teu and $500/teu for both eastbound and westbound cargo, assuming an average bunker price of $650/ton. The actual level would depend on the average size of vessel deployed in each loop and the increase in speed required to get up to 22k.

This would be partly offset by the avoidance of Suez Canal fees, estimated to be around $34/teu, for a 13,100 teu vessel, and the cost of anti-piracy measures in the Gulf of Aden.

Some feeding of Indian Subcontinent and Middle East cargo to/from hub ports such as Singapore, Port Klang and Colombo, would be necessary, as well as between hub ports in the Western Mediterranean and gateways in the Eastern Mediterranean/Black Sea, however there is enough surplus vessel capacity for this.

Matthew Beddow, manager of Container Insight Weekly, remarked: ‘The message is that, although there would be immediate disruption to Europe’s supply chains in the unlikely event of the Suez Canal closing tomorrow, equilibrium would be established within weeks.’

If vessel speeds were to remain unchanged, westbound and eastbound transit times between Asia and Northern Europe would, on average, become 7.0 and 8.5 days longer respectively. Moreover, an extra two vessels averaging 10,300 teu would have to be transferred from other routes into each of the tradelane’s 24 weekly loops.