KWANG POON

Geopolitical Strategist

The Suez Canal sees almost 12% of the global trade and provides a shortcut for ships

KWANG POON

plying the routes between Europe and Asia. Along with the Panama Canal, the Malacca Straits, it is one of the chokepoints along critical Sea Lines Of Communications (SLOC) on which marine traffic is heavily dependent.

On Tuesday the 23rd March 2021, the Ever Given Ultra Large Container Vessel (ULCV) apparently experienced a power failure, losing its steering. Then, due to strong lateral winds, the ship veered out of control in the narrow Suez Canal. The bulb at the bow rammed into the embankment and locked the ship into position, blocking the whole width of the waterway. Referring to its itinerary, the ship was moving north in the canal while on its way from Ningbo in China to Rotterdam, the largest port in Europe.

On the 30th of March 2021, the dredgers and tugs managed to disengage from the bank after an excavator dug around the bulb. Then, taking advantage of the high tide, the tugs finally succeeded to pull it out of its predicament. Lloyd’s List estimates that the incident caused nearly USD 10 billion of goods to be immobilized per day.

The Ever Given is a super container ship which measures 400 m in length and 59 m at its widest. It has a draught line of 16 m and tonnage of 220,00 tonnes with a capacity for 20,000 TEU. In 2018, its construction was completed and it was registered under the Panamanian flag but the Japanese company, Shoei Kisen Kaisha, actually owns it. The Japanese firm then time chartered it to the Taiwanese shipping company, Evergreen, which has put it on operation on the Far East-Europe line. Finally, the crew of the ship is fully Indian. Thus, the Ever Given is a great illustration of the tight integration of the global economy.

Indeed, marine traffic map shows that a substantial backlog of ships have accumulated on both sides of the Suez Canal. On average, 50 ships go through the Suez Canal in both directions everyday. In 2019, Egypt collected nearly USD 6B in revenues from the Suez Canal. With the canal blocked, Egypt is thus currently experiencing a shortfall of USD 16 million per day.

The Bunkering Hub

Comparatively, the nearby waters of Mauritius counts as many as 35,000 vessels annually, which translate to nearly 100 vessels per day. Since these are open waters, Mauritius cannot collect toll fees but there are several ways to attract these ships to generate benefits for the Mauritian economy. In fact, back in 2015, the Bunkering Hub was presented as a flagship as part of the Vision 2030 and perhaps, it is time to revisit the concept in a more holistic manner.

Other than bunkering, the Mauritian Maritime Hub could provide a range of services such as transshipment, shipchandling, shipyard services, rest and recreation, crew change, medical care, etc, can be considered. Due to its geostrategic location, Mauritius is ideally positioned to act as a transhipment hub between Asia and Africa. Trade volume is set to increase exponentially due to the resilience and robust growth experienced by these two regions while health and geopolitical uncertainties still plague other parts of the world.

As for ship registration, although there was some discussion at some stage, no comparative benchmarking study with ship registration powerhouses such as Panama, Liberia or Marshall Islands appears to have been undertaken in order to come up with an attractive package and differentiated offering.

Perhaps, it would be good to remind ourselves of the Wakashio incident. The bulk carrier was on its way to Brazil to bring back iron ore for the Chinese market. It is a Capesize carrier which means it might not fit in the Suez Canal but has to around the Cape of Good Hope. If we are to believe the Captain, he routinely changes course  “to get WiFi signal” while passing by Mauritius. This Wakashio episode demonstrated to how far ship crews might go to just to get on the internet. As tragicomical as this may sound, it does highlight an untapped business opportunity.

Although these may be revised to improve no safety, plans were on already the drawing board of the Suez Canal Authority to upgrade the waterway to accommodate up to 100 ships per day by 2025 in line with traffic growth forecasts. Given the criticality of the Suez Canal, the USA even did a pre-feasibility study to dig out a parallel canal across Israel through the Negev desert which is “amenable to nuclear excavation methods” back in the 1960s. As a consequence of the economics and marine traffic involved, multi-billion dollar levels of investments are thus being contemplated.

This Suez incident forced some ships to use the Cape route which so happens to be the ancient Maritime Silk Route. Looking back in history and forward in the future, we can see rich pickings along those critical maritime trade routes along which Mauritius happens to be situated. Looking up, the horizon is crystal clear and “a glorious rainbow beckons.” At the end of the rainbow, there is a pot of gold for the taking.