Why Major Shipping Companies are Opting for the Longer Route Around Africa
The shift of larger shipping vessels toward the longer and often more costly route around Africa's Cape of Good Hope instead of passing through the Suez Canal is a strategic decision driven by a variety of economic, operational, and security factors.
Physical and Operational Limitations of the Suez Canal
The Suez Canal, while a vital international waterway, is subject to physical and operational limitations that can make it less favorable for larger ships. The canal has maximum vessel dimensions that ships must adhere to. Currently, the largest ships that can navigate the Suez Canal measure around 400 meters in length, 59 meters in width, and 20 meters in draft. Ships exceeding these dimensions are unable to transit the canal, forcing them to find alternative routes.
The canal also has a finite capacity, leading to congestion during peak traffic times. This congestion can result in extended waiting times for ships, delaying their arrival and departures. In contrast, the longer route around Africa offers more flexibility in terms of scheduling and port calls, making it a viable alternative for many shipping companies.
Economic Considerations: Suez Canal Fees and Fuel Costs
One of the primary economic drivers for choosing the longer route is the cost of Suez Canal transit fees. These fees can be substantial, with estimates showing that a large container ship might incur costs of around 500,000 to 700,000 for a single passage through the canal. By comparison, the additional fuel costs for the longer journey around Africa can sometimes be lower, especially when fuel prices are low. For instance, the average price of very low sulfur fuel oil (VLSFO) in 2020 dropped significantly, as demand for bunker fuel decreased during the COVID-19 pandemic, making the longer route more economical.
Operational Flexibility and Capacity Management
Shipping companies must often adapt their operations to manage capacity and schedules efficiently. Slowing the speed of ships to reduce fuel consumption and expenses can be an effective strategy. The longer route around the Cape of Good Hope allows for this slower speed adjustment without the need to adhere to the strict schedules required for the Suez Canal transit. This operational flexibility is a significant benefit for shipping companies.
Security and Geopolitical Risks
The Suez Canal is known to be a high-risk route due to piracy and other security concerns. Though piracy rates have decreased in recent years, the risk still exists, necessitating additional expenses for security measures such as armed guards or rerouting. The route around the Cape of Good Hope, while longer, avoids these high-risk areas, making it a safer and more predictable option for many shipments.
Environmental and Regulatory Factors
The introduction of the International Maritime Organization's (IMO) 2020 sulfur cap has added another layer of consideration for shipping companies. Compliance with these regulations can influence route choices. Some ships may prefer routes that allow them to use scrubbers or alternative fuels more effectively, further supporting the longer route around Africa.
Disruptions and Reliability
The Suez Canal's critical role as a chokepoint has been tested by unforeseen incidents, such as the blocking of the canal by the Ever Given in March 2021. This incident caused significant traffic jams and delays, highlighting the vulnerability of this crucial waterway. These disruptions can result in substantial costs for shipping companies, leading many to opt for more reliable, albeit longer, routes.
In conclusion, the decision to take the longer route around the Cape of Good Hope instead of the Suez Canal is a strategic choice influenced by a combination of economic, operational, and security considerations. This shift reflects a complex interplay of factors that shipping companies must carefully evaluate to optimize their operations and minimize costs.