Suez Canal blockage shows vulnerability of world’s trade choke points
- The canal is just one of 14 choke points that experts have identified as vital to global food, oil and grain supplies. Yet there remains a lack of international effort to address such fragilities
Global oil prices shot up 6 per cent overnight, and already-high freight rates spiked. By Friday morning, more than 200 ships were stalled – many travelling from the Mediterranean towards the Indian Ocean, and others travelling north towards Europe and the United States. Around 13 million barrels of crude oil and oil products were held up. Millions of containers carrying everything from grains to chilled meat and furniture were trapped on the not-so-high seas.
Almost immediately, ports in Europe and Asia gummed up as ships bound for the Suez Canal were forced to idle. Import-dependent Asian economies such as China and South Korea anxiously reviewed stockpiles of crude oil, liquefied petroleum gas, grains and food products.
Depending on how quickly the blockage clears, trade disruptions may only be temporary, but the accident is a clear reminder of the vulnerabilities of global trade and its long, complex supply chains.
The Suez Canal is one of 14 critical choke points for global trade identified by Chatham House researchers in a prescient 2017 report, and as global trade has grown – in particular for grains, food and oil-based products – so the imperative for international cooperation in addressing choke point vulnerabilities has strengthened. Needless to say, such international cooperation remains virtually non-existent.
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Giant cargo ship causes marine traffic jam by blocking Egypt’s Suez Canal
All face severe vulnerabilities, none of which are merely hypothetical. According to the study, the Panama Canal has suffered accidents and temporary blockages five times since 2010 and the Turkish Straits six times since 2013. The Suez Canal has suffered eight blockages since 2010, with at least four due to ships blown off course by high winds and dust storms – the apparent cause of Ever Given’s grounding.
Mercifully, these disruptions were quickly resolved without long-term harm, but we are perhaps living on borrowed time.
At the time of writing, the Ever Given remains wedged, with each day of disruption generating mounting challenges for international trade. The scale of our reliance on the safe passage of today’s monster ships through these choke points cannot be underestimated.
Give or take a few metres, that is the same as Hong Kong’s International Finance Centre laid on its side and pushed out to sea. Its length is twice the width of the Suez Canal’s narrowest point.
The Suez Canal, which was first opened in 1869, has been progressively extended, widened and deepened to accommodate such giants, but as this week’s accident shows, this has been a relentless challenge. When the canal opened, it was 164km long, 8m deep and could handle ships up to about 5,000 tonnes.
Just as few of us have any sense of the size of these monsters, so we are cheerfully ignorant of our reliance on them and their safe passage.
In any one year, the Suez Canal carries around 8.5 per cent of global grain – and 39 per cent of the wheat exported from Russia, Ukraine and Kazakhstan, a region that has become a critical supplier not just to the Middle East and North Africa, but to China too. It also accounts for a significant volume of the oil products carried by sea and over 30 per cent of potassium-based fertilisers.
As trade has grown between Asia (in particular China) and Europe, there has been rising recognition that there is no practical escape from our reliance on the Suez Canal. Routing south via the Cape of Good Hope is too expensive.
China has made much of efforts to build its rail-based freight business across Central Asia or Russia to Europe, but there is little prospect of this ever denting our need for the monster ships of Maersk or Evergreen.
After several years of meteoric growth, China’s railway authorities boasted that 12,000 freight trains carried containers between China and Europe last year. At an average of 100 containers per train, that amounts to 1.2 million containers a year.
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In comparison, the Ever Given carries 20,000 containers – just 60 journeys are equivalent to a year’s railway traffic between China and Europe. With an average of 51 ships per day travelling through the Suez Canal, two or three days of sea traffic would account for an entire year of freight trains.
So what lessons arise from this Suez Canal disruption? First, accidents are happening too often across our key trading choke points, and urgent international cooperation is needed to reduce and manage risks.
The Ever Given may be refloated soon, with cargo flowing again, but there are important lessons we would be remiss to ignore.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view
