Shipping lines have begun changing traditional vessel routes from transiting through the Panama Canal, due to decreased water levels, to passing through the Suez Canal.
There have also been recent attacks on both naval and commercial vessels in the Red Sea, as part of the ongoing conflict in the region. This has contributed to ocean carriers taking further consideration of how to route vessels, since the Red Sea is the main waterway for cargo moving in and out of the Suez Canal.
Many routing changes have been announced over the last week; therefore, we are providing an update on the activity taking place and an overall picture of what to expect. However, this is not a comprehensive list of shipments or vessels affected. Discussions about individual shipments should be had with your Mohawk Global representatives.
Re-Routing of Vessels Through Suez Canal
Both THE Alliance and Ocean Alliance have announced that many vessels initially scheduled to move through the Panama Canal have been re-routed to move through the Suez Canal. Some of these vessels were already at anchor outside the Panama Canal, which made the decision to re-route surprising and costly to the carrier. 2M may follow suit, as well.
When this re-routing occurs, an Eastbound vessel carrying U.S. imports from China/Asia to the U.S. East Coast and Gulf Coast ports is expected to have an increased transit time (TT) of 10 to 14 days from typical TT. This is to say that a 30-day expected TT via the Panama Canal from Shanghai to New York is likely to be 40-45 days via Suez Canal.
A Westbound vessel carrying U.S. exports may see smaller variations in TT, but some delays to traditional schedules should be expected.
There have been no announcements of permanent or indefinite changes to Panama Canal service strings moving through the Suez Canal—this remains “case by case.” However, the number of vessels already making this change before the Panama Canal hit a “crisis” point suggests this could be common moving forward.
Avoiding the Suez Canal
Some vessels, especially those owned or affiliated with Israeli businessmen or companies, may elect to avoid the Suez Canal to limit the risk of attack when in the Red Sea. Ocean carrier ZIM, which is Israeli owned, may face a higher threat.
At least four vessels have announced they will avoid the Suez Canal and move around the Cape of Good Hope at the southern tip of the African continent. We may see this number continue to increase as there has been an uptick in targeting commercial vessels.
General changes in TT are difficult to predict with this non-traditional path. Ocean carriers have announced that the anticipated TT for vessels routed around the Cape is similar to moving through the Suez Canal in the current climate. However, we will monitor this closely and prolonged TT should be expected until proven otherwise.
Effects on Costs
Ocean carriers will likely face increased costs because of the challenges with using either Canal. This could include paying higher surcharges or fees to limit issues moving through the Panama Canal, or higher fuel expense for moving on elongated routes like utilizing the Cape of Good Hope.
Most carriers have already announced new Panama Canal surcharges for cargo passing through. Shippers may see other surcharges announced to offset additional costs related to the re-routing of cargo via alternative methods.
We will also monitor the risk of a “War Risk Surcharge” or other similar announcements from carriers that could occur on cargo moving through the Suez or Red Sea. If you have any questions, reach out to your Mohawk Global Representative.
By Chris Lindstrand, Director of International Transportation