Suez blockage prompts shipping angst over piracy threat
Shipping companies have contacted the US Navy about the potentially elevated threat of piracy to rerouted vessels after a container ship ran aground and could block the Suez Canal for weeks. Asian shipping associations confirmed the concerns as they contemplate anchoring billions of dollars of cargo at sea or taking other lengthy — and potentially risky — routes around Africa. Zhao Qing-feng, office manager of the China Shipowners’ Association based in Shanghai, said on Friday that potentially rerouting vessels included security considerations.
“Africa has the risk of piracy, especially in east Africa,” he said, adding that shipping companies might need to hire extra security officers. Rolf Habben Jansen, chief executive of Hapag-Lloyd, the world’s fifth-largest container carrier, warned there was “nothing we can do” about cargo stuck on vessels outside the Suez Canal and the company’s focus was to get ships to their intended destinations as soon as possible.
But Peter Sand, chief shipping analyst at Bimco, said some ships could head “to a nearby port like Djibouti” to air freight components or goods in an effort to limit the impact on certain manufacturing supply chains. While east Africa has long been known for piracy, there has been a surge in kidnappings at sea and other maritime crimes in west Africa in recent months.
Dimitris Maniatis, chief commercial officer of Seagull Maritime Security, a provider of ship guards, said that private security would cost between £5,000 to £10,000 per vessel if those waiting at the southern entrance of the Suez Canal needed to turn back and sail through the Gulf of Aden. He added that vessels rerouted to bypass the Suez Canal and travel around South Africa’s Cape of Good Hope would steer well clear of dangerous areas off the coast of west Africa. The US Navy told the Financial Times there had not yet been an impact on naval operations in the region, but companies were concerned that if the blockage continued, their vessels could face risks.
James Wroe, head of liner operations at Maersk Asia Pacific, wrote on social media that the decision of whether to reroute was a “roll of the dice”. Jansen said three vessels in its alliance with other shipping companies had been diverted. The Ever Greet, sister ship to the Ever Given, the vessel stuck in the canal, has also been diverted.
Shipbrokers in Singapore and Tokyo said similar rerouting decisions were “imminent” on a number of oil tankers and other vessels. Vessels travelling from Singapore to Rotterdam via the Cape of Good Hope faced additional costs of £400,000 per vessel for a full voyage said Anoop Singh, head of tanker research at shipbroker Braemar ACM. Shipping companies estimated that almost 200 vessels were stranded on either side of the Suez Canal, the chokepoint through which about 12 per cent of global trade flows.
The route is critical for oil, gas and high-demand food commodities such as coffee.
The Suez Canal in numbers
The average number of ships passing through the 120-mile long Suez Canal each month — more than 50 ships a day
Bulk carriers account for almost 30% of traffic, container ships 25% and tankers for 15% of transits
The number of ships that passed through the Suez Canal in 2020 (data provided by Refinitiv) Several Asian carmakers rely on the route to transport parts bound for European factories, raising the possibility of plant stoppages across the UK and Europe in an extended blockage. Nissan, which said it was “assessing the impact on our operations”, confirmed it used the Suez Canal for all of its ocean shipments to Europe from Asia.
Honda also said it was monitoring the situation. Because of the sheer number of parts they use, carmakers hold very little stock, instead relying on “just in time” delivery of components. Delays at sea often see carmakers turn to expensive air freighting of parts as an emergency measure.
The warnings came as shipping operators’ stocks jumped on the prospect of higher freight rates, as industry executives contemplated rerouting cargo around southern Africa, which would add at least seven days and potentially force the cancellation of other scheduled routes. Shares in Maersk, the world’s largest container group, gained about 4 per cent, following Asian peers higher, including a 16 per cent bump for South Korea’s Hyundai Merchant Marine after salvage experts indicated it could take weeks to dislodge the 400-metre Ever Given from the banks of the Suez Canal. Dutch and Japanese salvage specialists have produced a variety of theories for how best to free the Ever Given, a formidable technical challenge that has been complicated by poor weather.
Nippon Salvage, which is part of the rescue efforts, declined to comment. An official at Shoei Kisen Kaisha, the Japanese owner of the Ever Given, said it was focusing on dislodging the container ship but added that resolving the situation remained “extremely difficult”. Jansen predicted it would “at least take a few weeks” for congestion at the Suez Canal to ease even if the ship is refloated soon.
“The market is betting that the issue might go on for a while,” said Kim Youngho, an analyst at Samsung Securities. “If you detour to the Cape of Good Hope, it will probably take at least one more week to reach the Netherlands from Shanghai . . . if you have to detour it should raise current freight rates further.”
Reporting by Harry Dempsey in London, Leo Lewis and Kana Inagaki in Tokyo, Song Jung-a in Seoul, Hudson Lockett and Nicolle Liu in Hong Kong and Stefania Palma in Singapore