A Traffic Jam in the Suez Canal? The Significance of Waterways in Global Trade

Traffic congestion is a possibility for any mode of transportation. When we leave the comfort of our homes and travel–be it for our daily commute or for the purposes of business and leisure–we will, at some point, inevitably encounter delays, blockages and congestions on our journey. The story is no different out at sea.

Egypt’s Suez Canal handles about 10 percent of international maritime trade and is one of the world’s busiest waterways, providing a crucial link for oil, natural gas and cargo shipping between the Atlantic and Pacific Oceans. The Suez Canal, an artificial sea-level waterway, connects the Mediterranean Sea to the Red Sea through the Isthmus of Suez; which divides Africa and Asia. Construction of the canal took ten years and it officially opened on 17 November 1869.

The idea of a large canal providing a direct route between the two bodies of water was first discussed in the 1830s, thanks to the work of French explorer and engineer Linant de Bellefonds, who specialized in Egypt. In its earliest days, only steamships were able to use the canal, as sailing vessels still had difficulty navigating the narrow channel in the region’s tricky winds.

The canal remains one of Egypt’s top foreign currency earners with 50 vessels passing through the Suez Canal every day. According to the Suez Canal Authority (SCA), nearly 19,000 ships, with a net tonnage of 1.17 billion tonnes passed through the canal during 2020, the second-highest load in the history of the canal.

The term ‘means of transport’ is used to distinguish between different ways of transporting people or goods. We may choose to travel by air, water, and land. Each mode of transportation comes with its own idiosyncratic benefits and challenges. The passageway through which people, animals, and other goods travel from one place to another requires a fundamentally different technological solution based on its environment with each mode requiring its own infrastructure, vehicles, and operations.

The Suez Canal, which is the fastest crossing between the Atlantic Ocean and the Indian Ocean, requires the payment of tolls for its use as a passageway, much like our highways on the road. The canal is a major source of money for the Egyptian state, generating $5.61 billion in revenue last year. The COVID pandemic led to the collapse of Egypt’s tourism sector and the toll revenue from the Suez Canal is now Egypt’s largest source of foreign income. The SCA introduced some reductions in transit fees for containerships going through the Suez Canal between 1 May to 30 June 2020, by providing rebates ranging from 17% to 75%.

The Ever Given, which is operated by Taiwan-based Evergreen Group and owned by Japan’s Shoei Kisen, had been sailing to Rotterdam from China. The container is said to have accidentally ran aground after a suspected gust of wind hit it. The ship is believed to have been caught up in a sandstorm, a common occurrence in Egypt’s Sinai Desert at this time of year, which leads to decreased visibility.

The Ever Given blocked the one-lane southern section between the Great Bitter Lake and the Gulf of Suez, effectively halting all traffic on the canal. The journey between ports in the Gulf and London is roughly halved by going through the Suez–compared with the alternate route around the southern tip of Africa.

CNN reported that eight tug boats are working to free the large container ship stuck in Egypt’s Suez Canal, halting marine traffic through one of the busiest and most important waterways in the world. The passageway accounts for approximately 30% of container ship traffic globally each day. In 2020, an average of 51.5 ships passed through the canal each day.

As of writing, there was a mounting backlog of well over 100 ships either stuck in the canal or waiting to enter it. Vessel charterers or owners who are unwilling to wait for the blockage to clear can opt to sail around South Africa, although that is a much longer route that would take more time and increase costs.

The blockage of the canal is the latest in a number of events, along with the Texas storms which shut down one of the world’s key petrochemical complexes and a global shortage of semi-conductors among them – that have highlighted how stretched and vulnerable global supply chains have become.

Shipping rates from Asia to Europe and across the Pacific have already been hovering at record levels over the past four months amid booming demand from e-commerce giants due to the Covid-19 imposed lockdowns. While the congestion on the Suez is expected to be a short-lived effect, the container ship industry is already very tight on capacity and is grappling with significant port congestion around the world.

Ship transport is responsible for the largest portion of world commerce. According to UNCTAD, maritime transport accounts for roughly 80% of international trade. The COVID-19 pandemic has underscored the global interdependency of nations and set in motion new trends that will reshape the maritime transport landscape. While the advent of aviation has diminished the importance of sea travel for passengers, transport by water is cheaper than transport by air. While extensive inland shipping is less critical today, the major waterways of the world including many canals are still incredibly important and are integral to the global economy.

The environmental impact of shipping includes air, water, acoustic and oil pollution. Ships are responsible for more than 18 percent of some air pollutants. Eleven States from across the globe are partnering in the International Maritime Organisation (IMO)-Norway GreenVoyage2050 Project, which is supporting the path to decarbonisation in the shipping sector to reduce greenhouse gas emissions from shipping.

The waters may ebb and flow, but shipping remains one of the oldest industries in existence. With each age, new challenges evolve which were seemingly not present in history. Traditionally, the most common cargo shipping risk management issues have been somewhat predictable; natural disasters, mechanical failures and human error.

We can neither overlook, underplay or diminish the traditional risks our ancestors faced when they got onboard a ship in search of greener pastures. Despite the risks involved, waterways have supported exploration, trade, warfare, migration and science for hundreds, if not thousands of years.

And despite the risks involved and the disasters, delays and deadlocks that may ensue, humans will always venture forth and do what they have always done–regardless of the natural or manmade obstacles that dare to stand in our way.