Carriers rerouting services back to Asia via Cape of Good Hope to skirt canal fees

Lines are avoiding the Panama and Suez Canals on some backhauls from Europe and the U.S. East Coast despite having to speed up vessels in order to maintain transit times, according to a recent analysis by ocean shipping industry consultant SeaIntel.    With the price of bunker fuel dropping sharply, some container shipping companies are rerouting vessels away from the Panama and Suez Canal on the backhauls of Asia-U.S. East Coast and Asia-North Europe services, according to the consulting firm SeaIntel Maritime Analysis.
   In the Feb. 14 issue of its SeaIntel Sunday Spotlight newsletter, the company says, “Since the end of October 2015, 115 vessels deployed on Asia-USEC and Asia-North Europe services have made the back-haul trip back to Asia by sailing south of Africa rather than through the Suez and Panama canals, which had been their routing on the headhaul.”
   “Three of these vessels were deployed on Asia-North Europe services, while the remaining 112 were deployed on Asia-USEC. Normally, 78 of those voyages would have gone through the Suez Canal,” SeaIntel said, while 37 would normally have returned to Asia via the Panama Canal.
   Alan Murphy, the CEO of SeaIntel, noted carriers have been speeding up their ships on return voyages, also known as the “backhaul,” so that schedules and transit times remain the same. Its analysis finds carriers can still realize savings since the extra fuel consumption is offset by not having to pay canal tolls.
   SeaIntel analyzed 14 Asia-USEC services — eight that sail via the Panama Canal and six that sail through the Suez Canal — where it says there is a potential economic benefit by switching to a routing via the Cape of Good Hope. None of these, it said, have intermediate port stops on their return to Asia. According to the report, 12 of these 14 services have used the alternative routing south of Africa.
   Sailing around the Cape of Good Hope on return trips to Asia from the U.S. East Coast adds an average added sailing distance of 4,400 nautical miles for services that would normally use the Panama Canal and 1,500 nautical miles for services that would use the Suez Canal.
   Panama services have an average return speed of 12.9 knots, while Suez services average 13.7 knots on return legs. To maintain schedules, ships would have to increase those speeds to an average of 18.6 knots and 15.7 knots, respectively.
   While bunker consumption would increase considerably, SeaIntel still calculates that carriers using the South Africa routing on Asia-USEC services could save anywhere from $2,541 to $421,217. The detailed analysis in SeaIntel’s newsletter compares potential cost savings for each Asia-USEC and Asia-North Europe string.
   SeaIntel said that for the two services of the the 14 Asia-USEC loops it analyzed that had not used the alternate route via the Cape of Good Hope, the savings would be minimal.
   “Our analysis shows that both the Panama and Suez canals face a significant challenge in the current low bunker price,” the consulting firm said.
   It also said the alternative route around Africa could help ameliorate persistent overcapacity issues faced by the container shipping industry.
   “Slowing down the services by a week in each direction to go around Africa would soak up a potential 60-80 vessels, of which half would be mega-vessels,” SeaIntel wrote. “This could take a significant bite out of the current over-capacity, possibly even (partly) restoring the supply/demand balance.”