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Low oil prices affecting Suez Canal, ships going around Cape of good Hope

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Staff writer ▼ | February 25, 2016
Suez Canal
Shipping   A new analysis from Port Overview

Canals were the latest industry to be affected by the downturn in oil, with new analysis from Port Overview suggesting the Suez was being particularly affected.

Both cellular overcapacity and low bunker fuel costs have led carriers to divert multiple sailings away from the primary arteries and around the southern African cape over the last year, the report shows.

Since the end of October last year, 115 vessels on Asia-U.S. East Coast and Asia-North Europe sailings had made the trip around the Cape of good Hope, rather than through the canals, despite using them on the head-haul legs.

"Normally, 78 of those voyages would have gone through the Suez Canal," the Port Overview report said.

"SeaIntel concludes that both the canals face a significant challenge in the current low bunker price, as it means that for many services it is cheaper to sail south of Africa on the backhaul than to use the canal routings," it added.

The canals had a disadvantage on US East Coast-Asia services in particular, it said, where it was currently economically viable for 14 out of 22 services to sail south of Africa on the back-haul, and would possibly be viable for almost all of them if intermediate ports were deleted.

"Currently, the carriers are only using the south of Africa routing on the back-haul legs and retaining the transit time, but considering the financial situation of most carriers, and keeping in mind the relative 'ease' with which the carriers implemented both slow-steaming and super slow-steaming, going south of Africa on the head-haul is going to look very alluring for some carriers, if indeed they can re-route the cargo from the intermediate port calls."

On top of avoiding canal fees and some of the particularly pirate-infested waters near the canals, the longer route around Good Hope - which added around a week of transit time - had the ability to 'soak up' between 60 and 80 vessels.


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