As the prospect of a gradual return of shipping via the Suez Canal is back on the table, the major missing voices in the debate are ultimately the shippers, who are fairly quiet, fragmented and, to be honest, disoriented on this issue.
The halt in attacks on merchant vessels, promised by Yemen’s Houthi rebels, is leading shipping companies to consider bringing container ships back via the Red Sea and the Suez Canal. One might have expected shippers to exert some pressure to accelerate this shift, while carriers are approaching it very cautiously, signaling that any return would be very gradual. Yet at this year-end, an almost deafening silence prevails, for several reasons:
- Europe’s large retailers had only just managed to realign their supply chains properly, after two years of routing via the Cape of Good Hope. They are therefore in no hurry to have to rework their logistics patterns again, especially since the longer route was not such a bad thing in the end: it allowed them, in a way, to benefit from floating inventory and from lower detention and demurrage costs. Supply chains that are once again well-tuned and affordable freight rates—what more could they ask for, apart from better schedule reliability? Another change in the service offering is not really good news for them.
- For European exporters, already penalized by an overly strong euro and multiple restrictions on access to external markets, the situation is different. A return via Suez could raise hopes of renewed activity in markets lost or declining in recent years, thanks to improved transit times. But shippers are in a rather weak position to put pressure on carriers, because freight rates on the dry export market to China are currently extremely low. It is hard to demand additional service on the basis of such poorly remunerated business, which also helps explain shippers’ discretion.
Will pressure to curb emissions be sufficient for the shortest route to once again become shippers’ preferred option? The trade-off is far from obvious!
Jérôme de Ricqlès, maritime expert, Upply