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Published: 14 March 2016      

More carriers avoiding Suez, says SeaIntel

More Asia-NAEC and Asia-North Europe carriers are opting to sail around the Cape in order to avoid Suez Canal fees, says the Danish maritime consultancy

In a previous Sunday Spotlight, SeaIntel showed that since the end of October 2015, 115 vessels deployed on Asia-USEC and Asia-North Europe services made the backhaul trip to Asia by sailing south of Africa instead of through the Suez and Panama Canals, their routing on the head-haul. Of the 115 voyages, three were vessels on Asia-North Europe, while the rest were deployed on Asia-USEC.

In its latest Sunday Spotlight, SeaIntel has analysed the possibility of carriers switching their head-haul routing to south of Africa in order to avoid the Suez Canal fee. The vessels currently using the route south of Africa on the backhaul have mostly used this option without increasing transit time or dropping intermediate calls (eg in the Mediterranean or Middle East), but have simply sped up vessels on the leg that would otherwise have gone through the Suez Canal.

CEO and Partner in SeaIntel, Alan Murphy, explained: “This is not an option on the headhaul, as all services currently sail so fast on the canal leg that roughly extra 3,100 n/m cannot be incorporated without increasing the transit time between Asia and North Europe, as most ultra large vessels cannot sail faster than 21-22 knots. We therefore examined the economic viability of the south of Africa routing if 3.5 or 7 days were added to the head haul transit time.”

The extra 3.5 days scenario implies that 3.5 days have also been added to the backhaul transit time, making it even more likely that the backhaul voyage will also be switched to south of Africa. The 3.5 and 7 days scenarios require that the carriers deploy an extra vessel per service in order to keep weekly intervals.

Charter prices vary quite a bit, and no efficient market currently exists for vessels above 10,000 TEU, but brokers contacted by SeaIntel normally assume that a vessel costs roughly US$3.5/nominal TEU per day; this covers the building costs, OPEX and the necessary return on invested capital. Thus a 13,000 TEU vessel roughly costs US$45,500 per day.

"[Our] analysis shows that 12 of the 19 dedicated Asia-North Europe services could sail south of Africa on the headhaul if 3.5 days was added to the transit time," said SeaIntel. "The potential savings vary from service to service, ranging from US$7.3M to US$19.4M on an annualised basis, compared to the current routing through the Suez Canal.

"If seven days were added to the transit time on the head-haul all 19 Asia-North Europe services would be able to make the routing south of Africa. On average the carriers would save around US$17.2M per year per service. Combined, the cash-strapped carriers could save US$275M per year.

SeaIntel also noted that an added benefit would be that both scenarios would soak up 19 ULCS, equalling roughly 270,000 TEU. "Such a move would be greatly beneficial for the carriers, as it would go a long way towards restoring the supply/demand balance in the market."

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