On March 23, 2021 the 20,000 TEU vessel Ever Given ran aground and wedged itself across the Suez Canal, all traffic through one of the world’s most critical waterways came to a halt. A highly reported race to free the stuck ship began almost immediately as did the recriminations to the cause of the stranding. While the blockage seemed much longer, the massive container ship was aground in the Suez Canal for a mere six days before being freed. But the cascading impact on the global supply chain was still being felt months later.
The Suez Canal averages over 90 vessel transits a day nominally linking the Mediterranean Sea to the Red Sea. But in reality, the Suez Canal ties Asia to Europe. The 120-mile waterway saves around 6,100 miles of transit using London, UK – Mumbai, India as two base points. The difference is roughly 26 days to 44 in sea time and is similar for container ship transits from Shanghai to Rotterdam. For a containership operator like Taiwan-based Evergreen, the owner of the Ever Given, there simply is no economically viable alternative to the Suez Canal.
For the world-at-large the grounding of the Ever Given was an eye-opening event. And while the Ever Given’s grounding was not a maritime tragedy, nonetheless for perhaps the first time, it thrust the vulnerabilities of the global supply chain into the mainstream public consciousness.
The Southeast Asian Choke Point
The Suez Canal isn’t the only maritime choke point, in fact, there are eight primary maritime choke points and dozens of secondary ones. The eight prime maritime choke points are the Panama Canal, the Strait of Gibraltar, Cape of Good Hope, Bosporus Strait, Suez Canal, Bab-el-Mandeb Strait, Strait of Hormuz and Strait of Malacca (see map of Primary Global Maritime Choke Points).
The two canals, Panama and Suez have both become essential to the flow of containerized freight. The Panama Canal in FY 2020 handled 12,169 ship transits of which 2,551 were container ships. In comparison, the Suez Canal during 2020 saw 18,829 transits of which 4,710 were containerships.
Both of these iconic canals are essential to trade and any global disruption – as the Ever Given stranding amply illustrated – would have a cascading impact on global supply chains. Nevertheless, it is likely that the closure of both the Suez and the Panama Canals would pale in comparison to a blockage of ship transits through the Strait of Malacca.
Although the figures on vessel transits through the Strait of Malacca vary depending on the source, an article in Seatrade Maritime News reported that the waterway’s ship transits for 2017 were 84,456 with 24,446 of the vessel passages being identified as containerships.
With 24,000 plus container ships transiting the Strait – averaging over 66 containerships per day – any disruption to the flow of vessels, whether accidental or deliberate (ReCaap reported there were 20 “incidents” during January-June 2021 period) would have calamitous impact on the supply chain. Add in the potential damage to the movement of energy supplies (tankers and gas ships) and the critical nature of the waterway to the global economy is clear.
The Port of Singapore, the second largest container port in the world (behind only Shanghai), is situated at the eastern entrance to the Strait of Malacca [via the 71-mile long, 10-mile wide Singapore Strait].
In a COVID-19 influenced year, the port handled 36.87 million TEUs (twenty foot equivalent units) and posted 96,857 vessel arrivals – of which 15,613 were container ships. The vessel arrivals represented an off year in terms of numbers for the Port of Singapore. The port regularly posts over 130,000 vessel calls a year but COVID-19 cut deeply into ship calls. Nonetheless the over 2.9 billion gross tons represented an all-time high and was another indicator of the rapidly increasing size of vessels, particularly container ships. Singapore is in the midst of building the largest terminal project in the world. The Tuas Mega Port is being built in four phases, with the 20 million TEU first phase set to open this year (2021) at an estimated cost of $1.76 billion. Eventually, all container handling operations will be shifted to the Tuas facilities from their current locations.
As the numbers suggest, the Port of Singapore is no ordinary container port. The Port of Singapore plays a number of essential roles. It is on one hand a transshipment hub, albeit on a grand scale, for Southeast Asian regional trade. The port also is a hub for liner shipping linking Southern Chinese ports to the India subcontinent, East Africa, the Middle East, the Mediterranean region and ultimately Europe. The port also serves as a way port for energy shipments moving to north Asian destinations such as China, Taiwan, South Korea and Japan (The US EIA (Energy Information Administration) estimates that 75%-90% of all shipments transit the Strait of Malacca). It also is a local port serving Singapore, the southern tip of the Malaysian peninsular and cross straits neighbor, Indonesia.
Globally, there are few port comparisons by which to measure Singapore. Hong Kong is often mentioned, as is Malta [Marsaxlokk Port] and the Netherlands’ Port of Rotterdam. None of these ports are as multifaceted as Singapore although they are all remarkably successful as transshipment hub ports for international trade in their respective regions [Mediterranean Basin and South China-Pearl River Delta and Europe].
Also mentioned as “hubs” are other mega-ports like China’s port of Shanghai and the South Korean port of Busan but again it is the varied roles that a port plays within not only the context of the Strait of Malacca traffic but the Southeast Asia region that sets Singapore aside. Simply put, the Port of Singapore is the ultra-transshipment hub and is as close to being indispensable to the global supply chain as any port in the world.
For these reasons, the Port of Singapore even a partial blockage of the port’s facilities could do immense harm to both regional and to international economies located many thousands of miles away.
Still, there are alternative routes, should the Strait of Malacca and access to Singapore be obstructed. Some of these routes are already in regular usage, particularly for deep draft VLCCs (Very Large Crude Carriers) and ULCCs (Ultra Large Crude Carriers) which seek to avoid the reefs and shallows of a Malacca passage.
Ships could use the Sunda Strait between the Indonesian Islands of Sumatra and Java to enter either the South China Sea or Kerimata Strait and onward passage to the Makassar Strait and into the Celebes Sea. There is also the Lombok Strait between Bali and Lombok and again either northward into the Kerimata Strait to the South China Sea or onward through the Makassar Strait and into the Celebes Sea.
None of these alternatives would replace Strait of Malacca/Singapore transits but could in the event of an Ever Given type incident in the waterway, provide a viable short-term detour.
Very Dangerous Ground
In the middle of the South China Sea lies an area known as the “Dangerous Ground”. Although tagged with the foreboding name because of the threat to navigation posed by the numerous cays, reefs and low lying islands, in recent times the name could well be a synonym for the entire South China Sea. The South China Sea is a sea of dispute. And as such, the South China Sea is potentially evolving into its own kind of choke point with various interests vying for influence. China, Vietnam and the Philippines along with virtually all the other littoral states have disputes in the South China Sea. And the U.S. has a strong interest in maintaining freedom of passage through the region.
China, whose maritime interests have grown at an astonishing rate since the late 1970s, has claimed virtually the entire South China Sea as its own through historical claims.
Undoubtedly, with the tension between the U.S. and China as the overarching condition any minor encounter between any perimeter nation or even the passage of an entirely third party through the South China Sea could ignite a much wider conflict effectively sealing off the sea to transits.
Dr. Mark Valencia, who has studied the region for decades offered the analysis should hostilities break out: “Those west of the Dangerous Ground would be the most likely to be “choked”. The alternative route to the east of the Dangerous Ground along the coasts of the Philippine islands would probably still be usable. Vessels of non-combatants could use those or go around – that is through the Indonesian archipelago or even south of Australia – although that would add considerable time and expense to the journey and thus to the cost of the goods.”
It’s worth noting that more than half of the world’s largest container ports are located in the South China Sea basin and any disruption to the trade flows would strangle global commerce to an extent far greater than occurred in either the recent COVID-19 pandemic or even the Great Recession of 2009. This potential for choking off international trade makes the South China Sea very dangerous ground and a maritime choke point whose closure would be catastrophic.
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