The ship blockage in the Panama Canal has not stopped... Recently, something went wrong on the other side of the Suez Canal. However, unlike the "natural disaster" on the Panama side, the Suez Canal side is more of a "man-made disaster". Everyone knows that the Palestinian-Israeli conflict has become increasingly serious recently. These days, Yemen's Houthi armed forces have also intervened, and they are still attacking merchant ships in the Suez Canal and the Red Sea.


For example, the world's largest container shipping company, Mediterranean Shipping Company (MSC), was attacked last Friday on its ship that can hold more than 2,000 TEUs.

Political and military matters are quite complicated, so we won’t go into details.

Anyway, the result is that four of the world's five largest container shipping companies have announced the suspension of Red Sea navigation and have detoured to the Cape of Good Hope.

Although it just blocks a sea and takes a detour, its impact on the world cannot be underestimated, and it can even be said to threaten the global economy.


You know, the Suez Canal-Red Sea-Mandeb Strait is a fortress connecting Asia, Africa and Europe. Generally speaking, ships carrying cargo from Europe to Asia will almost always choose this route.


In addition, due to the influence of El Niño weather some time ago, the water level in the Panama Canal dropped seriously, and the average daily traffic volume dropped again and again.


At that time, many shipping companies also chose to take a detour from the Suez Canal.

According to CITIC Securities statistics, this year alone, the number of ships passing through the Suez Canal has reached 24,743, with an average of 70 ships passing through there every day.

In the global maritime transport landscape, this fortress accounts for 12% of the world's cargo.

Moreover, merchant ships and oil tankers are the main force among these ships, which basically cover all categories of global trade.

Dry bulk ships and container ships account for more than half. They transport bulk groceries, such as grain, toys and other daily necessities for food, use and play.


The most important thing left is some oil tankers. And in recent years, exchanges in the energy field between the Middle East and Europe, as well as Asia such as Russia and India, have become more and more frequent.

It happens that the Suez Canal is stuck at this pass, so the number of energy ships passing through has naturally increased. By this year, the traffic volume of crude oil tankers and product oil tankers has accounted for 24% of all ships.

I didn’t expect that such an incident would happen now, and it would dumbfound the major shipping companies...

What they can choose is to either change their route, or wait there until the storm subsides and there is no risk.

If we take a detour, the only place we can go is the Cape of Good Hope, the southernmost point in Africa.

Red is the original route, green is the detoured route


If you go around in a big circle, you will have to walk at least 7,000 or 10,000 kilometers, which will waste a week or two.

And the extra gas money spent on traveling is also a huge sum.

Shipping market analyst Peter Sand predicts that if most routes are detoured to the Cape of Good Hope, each trip will cost basically more than $1 million, which is equivalent to one-third of the cost of a round trip from Asia to Europe.

As for these extra costs, shipping companies will definitely not have to bear them themselves. They will "scoop" them layer by layer, and consumers will ultimately have to bear them.


For example, if cars from the domestic Tesla factory are to be transported to Europe, it is definitely the shortest way to go through the Suez Canal. However, now that they are detouring around the Cape of Good Hope, the transportation cost has directly increased by 20%.

According to the International Ship and Offshore Network, many shipping companies will directly double their freight rates early next year.

The sixth largest shipping company, Evergreen Shipping, has a freight rate of US$3,694/TEU (small-size container) and US$5,988/FEU (large-size container) at the beginning of next year.

At the end of this year, the prices were still quoted at US$1,900/TEU and US$2,800/FEU. In just a few days, the price nearly doubled.


Another shipping company, Hapag-Lloyd, their freight rates at the beginning of next year are also 50 to 60% higher than now.

In the end, the extra freight charges paid by merchants will still fall on consumers...

However, there are some leading shipping companies that still stick to the Suez Canal and will not detour until the last moment.

Oil tankers account for a large part of this, and almost all oil tankers do not choose to change routes.


Because judging from the current situation, the attacks in the Red Sea only targeted some merchant ships, and no oil tankers have been attacked for the time being.

So they took a gamble and waited until the situation stabilized before leaving.

More importantly, compared with those commercial ships, the cost of these oil tankers detouring around the Cape of Good Hope is simply too high.

Let’s put it this way, most of the oil tankers that choose to pass through the Suez Canal are on the line from the Persian Gulf to Western Europe or North America, and the cargo they transport must be within 150,000 tons.

On the map, the Red Sea is almost at the "doorstep" of the Persian Gulf, just around the corner.

Red is the original route, green is the detoured route


If we really have to detour through the Panama Canal, the entire voyage distance will be twice as long, which would be unbearable for shipowners.

Moreover, if you take the detour around the Cape of Good Hope, you will encounter oil tankers of more than 250,000 tons (exceeding the upper limit of the Suez Canal). They also take the route from the Persian Gulf to Western Europe and North America.

Looking at the carrying capacity difference, you can tell with just your toes that this is not a cost-effective choice.

Of course, not taking a detour does not mean there will be no losses.

Braemar, the world's second largest shipbroker, said that ships are often stuck there in the past few days, and some shipowners have been clearly informed that they have to wait a few more days to pass through the Suez Canal.


And all this wasted time is money wasted by the shipowners.

In addition, the insurance costs of these ships that do not detour have also increased significantly, from 0.1~0.2% of the hull value to 0.5%.

In other words, if the ship is worth $100 million, it will have to pay an additional $300,000 or $400,000 in insurance for each voyage...

The extra money lost has almost caught up with the cost of the detour...

In the end, to put it bluntly, major shipping companies are also weighing between detouring and not detouring. In the final analysis, it depends on which one has the least loss.

As for the extent of the impact this storm will have, we are not sure yet.

However, the market has begun to change vaguely. According to the New York Times, in just one week, the price of Brent crude oil, the international oil benchmark, has increased by eight percentage points.

Xu Kai, CIO of Shanghai International Shipping Research Center, also revealed in an interview with the Global Times that the impact depends entirely on how long the storm lasts. If it can be resolved as soon as possible, the small market fluctuation will soon pass.

But if it lasts for too long, the supply and demand in the market will be broken, and the consequences may be comparable to or even far greater than the impact of the "Changci" cargo ship running aground in the Suez Canal two years ago...

At that time, the "Changci" was blocked for six days. The German insurance company Allianz estimated that this would cost global trade US$6 billion or even US$10 billion per day.


Although the Suez Canal is not completely blocked this time, the lethality of this risk and uncertainty cannot be underestimated.

In the past two days, the World Maritime Council was also forced to come out and say, "The right to free navigation is a basic right stipulated in international law and must be protected."

Shichao also hopes that the situation in the Red Sea area will stabilize as soon as possible so that the Suez Canal can pass smoothly as soon as possible.

After all, every additional day of congestion brings greater risks and more losses.

If the entire global supply chain is really "hurt" by then, the consequences cannot be made up in a day or two.

Written by: Squirrel Editor: Jiang Jiang Cover: Huanyan

Pictures and data sources:

Baidu map

Global Times, shipping giants have suspended sailings, merchants are worried about rising costs, and the Red Sea channel crisis affects the global supply chain

International Ship and Offshore Engineering Network, sea freight prices have doubled! This ship type still clings to the Suez Canal! How to plan the route?

Wall Street News: Sailing on the Red Sea is suspended and the global supply chain is under tension

TheNewYorkTimes , RedSeaAttacksPoseAnotherThreattoGlobalEconomy