It is hard to imagine anything more central to the world's choke points than the Suez Canal. Albeit relatively recent, built only in 1869, its enviable position - where the Asian, European, and African continents meet - has meant it has quickly climbed the ranks of the hottest bottlenecks. Around 12% of global trade passes through the Suez Canal, accounting for 30% of all global container traffic, and over $1 trillion worth of cargoes annually. In 2020, some 19,000 ships used the route. The Suez Canal is an important route for energy, raw materials, consumer goods, and components from Asia and the Middle East to Europe. The canal's location also makes it a key regional hub for shipping oil and other hydrocarbons. In recent years, between 7% and 10% of the world's oil (about one million barrels of oil daily) and about 8% of liquefied natural gas passed through the Suez canal annually. In 2019, about 54 million tonnes of minerals and metals and 35 million tonnes of coal travelled along the canal.
Recently, the centrality of the Suez Canal emerged in full force in the wake of the Ever Given accident when, on the 23rd of March, a 200,000-tonne, 400-metre long mega-ship blocked traffic flows between Asia and the rest of the world for six days. The blockage of the canal dealt a severe blow to world trade in the short- and medium term. Though it is difficult to assess the exact cost, it is estimated that $9.6 billion of trade was blocked every day, which equates to $6.7 million worth of goods per minute, according to Lloyd's List data.
Suez: a crucial “chokepoint” for international trade
The Ever Given blockage demonstrated the vulnerabilities of international shipping routes and the fragility of supply chains. It was new to the general public, consumers, newspapers, and politicians: most assume the products they buy appear in front of them almost by miracle; few have any idea of the network of services that is activated every time they buy something on online market places or every time they enter a supermarket to choose an item. Only those who work in the logistics and transport sector are fully aware of the key role of logistics and this particular canal for international trade. For them, the news was a real nightmare, an attack at the heart of the global network of goods flows.
When the canal was originally opened, it was 164 km long, 58 metres wide (minimum), and 8 metres deep. The canal has demonstrated a good ability to adapt to the needs arising from changes in shipbuilding. In 2013, an $8.6 billion expansion project began to allow a two-way passage of ships. The new Suez Canal - inaugurated in August of 2015 -, the recent new access channel, and the Suez Canal Corridor Area Project (SCZone) have strengthened Egypt's role as a major hub for global trade and generated unprecedented flows. The new infrastructure allows for an estimated average reduction in travel time of 11 hours per transit in both directions; an increase in daily transit capacity to 97 ships (from the previous average of 49); and no limits on megaships. The canal provides a convenient alternative not only to the Cape of Good Hope route, but also to the Panama Canal for some routes between Asia and the US East Coast. Transiting the Cape of Good Hope route requires an additional 9,000 km or 6-14 days of travel, depending on the ship and cargo. The usual transit time through Suez from one end to the other is about 13-15 hours.
Alternatives to the Suez route: are they feasible?
The two main alternative routes to the Suez Canal linking Europe and Asia have renewed the interests of the United States, China, and Russia, the global economy’s central players, although their potential will only be shown in the long term. The first is the North Sea route through the Arctic. Declining ice extent in the Arctic Sea has opened up the prospects of commercial shipping through the North Sea Route (including the Northeast Passage which extends the North Sea Route towards Europe), the Northwest Passage, and the Transpolar Sea Route. For ships trading between Northern Europe and Japan, using the North Sea Route could potentially reduce travel distance by 37%. Distance reductions from Northern European ports to Korea are estimated at 31%, at 23% to China, and at 17% to Chinese Taipei .
The second alternative to the Suez Canal is the multimodal corridor of the Silk Road Economic Belt, promoted by China. This corridor, however, sees in the Suez Canal a strategic corridor for the construction of the new Silk Roads and, therefore, Egypt as a pivot of Beijing's interests in the Middle East and North Africa.
Both of these alternatives do not yet seem concrete. The greater predictability in the timeliness of transit through the Suez Canal, the strengthening of local transshipment hubs, the choice not to increase the Canal's tariffs (after enlargement), the massive investment plan — such as the recalled SCZone aimed at implementing a regional development strategy — will contribute to maintaining the Canal's high level of competitiveness over time.
The importance of Suez for the Mediterranean
Mediterranean ports are in a strategic position to serve the business of ship-to-ship transshipment, but also some of the hub and spoke links, acting as connectors between global and regional markets being fed through the Suez’s route. The Mediterranean region has experienced relevant growth in maritime investment over the last two decades, becoming a strategically important logistics platform for the East-West trade route - linking Asia, Europe and the East Coast of the United States, and the connection between the Atlantic and Indian oceans.
The new centrality of the Mediterranean has been powered by three concomitant elements: the emerging 'naval gigantism', i.e. the strategic use by major shipping companies of huge ships (between 13,000 and 22,000 TEU) which can only be accommodated by the Suez Canal (the Panama Canal can host ships up to 13.000 TEU); the acceleration of global alliances formed by shipping companies to exploit their economies of scale; and the recalled widening of the Suez Canal. However, the perspectives for Mediterranean ports remain unstable. Their poor intermodal connectivity, which limits the opportunities to expand their hinterland region and the related economic benefits represent a growing limit. The competitiveness of a port is not only determined by its geography - i.e., its proximity to the main shipping line - but also by the overall quality of the services offered, especially in terms of connections with other transport networks. Southern European ports still have a long way to go to be fully competitive with Northern ports in attracting significant shares of trade flows and take the full advantage of the opportunities offered by the Suez Canal.
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