Suspended Red Sea, Cape of Good Hope "Hope is hard to come by"

Starting from the beginning of this month, the prolonged conflict between Palestine and Israel has led to unrest in the entire Red Sea region of the Middle East. As a byproduct, the Yemeni Husai armed forces have begun to frequently attack passing ships - regardless of military or civilian use. After being harassed nearly 20 times, including Maersk MSC、 Nearly 10 container shipping companies, including Herbert and Daffy, as well as energy transportation companies such as BP and Frontline, have announced the suspension of routes through the Red Sea and replaced them with detours around the Cape of Good Hope in South Africa.

This undoubtedly adds an elusive layer of melancholy to the international shipping industry, which is in a tumultuous autumn.

As is well known, there are two key nodes on the international shipping route - the Panama Canal and the Suez Canal, both located on the main east-west route with the largest cargo volume in the world. The Suez Canal is an important hub connecting Europe and Asia. Previously, it was due to the grounding of Changci, a subsidiary of Evergreen Corporation, in the middle section of the canal that a serious "chain breakage" accident occurred in the international supply chain.

But what many people overlook is that the Suez Canal is just an endpoint in the narrow terrain of the entire Red Sea, and simply controlling the Suez Canal cannot fully grasp this route. On the contrary, if one can have the right to speak in any section of the sea between the Strait of Mandate and the Suez Canal, the role of the Suez Canal will be greatly reduced, and even become a decoration. And the Husai armed forces precisely found this pain point through accidental collisions.

Now, with the emergence of alternative solutions, an ancient route has once again entered the vision of the shipping industry - the Cape of Good Hope in South Africa.

Although there is widespread controversy in history, the current internationally recognized standard is that the age of the Cape of Good Hope route can be traced back to the early Age of Discovery more than 500 years ago. The first person to name it was Bartolomeu Mu Diaz, a Portuguese.

From then on, the Cape of Good Hope remained an important route for Eurasian shipping until the opening of the Suez Canal (old) in 1869.

Compared to the current international shipping route - Asia via the Red Sea via the Suez Canal to Europe, circumnavigating the Cape of Good Hope will increase the distance by nearly 40%. This also means that the time for Eurasian shipping will become longer and costs will increase significantly.

Although the fees for the Suez Canal are high, considering the increased fuel costs, ship maintenance, and personnel salaries due to the voyage, the cost of the voyage to Cape of Good Hope will be more than 20% higher than that of traveling through the Suez Canal. If combined with the significant increase in shipping premiums caused by the wars between Russia, Ukraine, and Palestine Israel (from 0.07% to 0.7%), international shipping, which is currently in a cold winter period, will undoubtedly face a new "black swan".

In order to survive, major shipping companies will definitely propose corresponding countermeasures.

Assuming the Red Sea incident is a short-term issue, the solution may appear relatively simple for shipping companies. Surcharges have always been their way of handling special costs. By sharing the additional costs during this period evenly among each box, ton, and shipper in this form, one can perfectly pass on their own troubles.

But if this becomes a medium to long-term problem, then the Cape of Good Hope route will become a brand new freight route, which will make the problem somewhat subtle and complex.

The new route means that transportation time, freight, and capacity allocation will be redefined.

So for shipping companies, first of all, they do not need to bear any compensation for delayed delivery time, even if it has never happened in the past;

Secondly, increasing shipping costs would appear very reasonable, after all, the routes have significantly increased;

Finally, the shipping company has the opportunity to calculate potential customers who will accept the transportation time and cost of the new route, and rearrange the already redundant and excess capacity supply on the original route to bring it closer to balance.

However, the potential problems go far beyond that.

Firstly, as the most important component of international trade, sea transportation has always undertaken over 80% of global cargo transportation. This is mainly because with the emergence of intensive transportation, sea transportation has become relatively the most economical mode of transportation. Especially on the east-west route with the largest cargo volume, the existing route has already become the most optimized choice. If costs increase due to detours around the Cape of Good Hope, then the international supply chain will inevitably need to be readjusted. For both buyers and sellers who have just emerged from the shadow of the epidemic, this is undoubtedly another heavy blow.

Secondly, no matter how the shipping company adjusts its capacity and allocates resources, the extension of the voyage will inevitably result in more ships needing to stay in ports and at sea, which will lead to a decrease in the turnover efficiency of the ships themselves. If encountering unexpected factors such as weather, strikes, equipment failures, etc., it is very likely to cause some ports to be blocked while others will be idle. This will further cause an imbalance in container supply, resulting in some ports being redundant and others experiencing severe shortages. The ultimate impact is that the delivery time of goods becomes extremely unstable, causing the "liner" to lose its original meaning.

Thirdly, the supply capacity along the route that bypasses the Cape of Good Hope is far less mature than the original route. Even though Durban, South Africa is already one of the most well-equipped ports on the air route, it still cannot be compared to several international transit ports in Asia in terms of infrastructure, operational standards, and supply capacity. If fuel and replenishment cannot guarantee economy and time-saving, it will inevitably become another potential risk that affects delivery and cost control.

Fourthly, in fact, the earliest name of Cape of Good Hope was "Storm Cape", and its unique geographical environment made this sea area located at the top of South Africa famous for its huge waves. More than 100 days a year are filled with waves as high as 6 to 7 meters, and giant waves exceeding 10 meters are also common. The rest of the time, waves are mostly 2 meters or more, which is not calm. Even if it is a 10000 ton ship or a 100000 ton cargo ship, the frequency of accidents here is significantly higher than in other sea areas.

The Eurasian route has always been one of the most important routes carrying the international supply chain, responsible for maintaining stable manufacturing and sufficient market supply in all countries along the East Asian to European route. If the current crisis in the Red Sea cannot be quickly and properly resolved, bypassing the Cape of Good Hope will result in a longer cycle for 47% of toys, 40% of household appliances, and 40% of clothing globally to reach the consumer market. Meanwhile, 24% of chemicals, 22% of automotive steel plates, and 22% of battery products will experience cost increases due to shipping issues.

In addition, for many countries in East Asia and Southeast Asia that rely on international supply chains to lead their economies, changes in shipping routes will have a serious impact on the international status of some existing port cities. Once Durban in South Africa or Port Louis in Mauritius is given the opportunity for upgrading and renovation, there will be a huge question mark as to whether Singapore and Malaysia's Tanjung Parapas will still hold a prominent position in international shipping. Whether these two cities (countries), which serve as the foundation for development, need to undergo a new transformation will be another unpredictable question.

For China, as a component of the east-west backbone, our connection with Europe in production, manufacturing, trade and logistics is inseparable. So even if transportation costs and delivery times change due to changes in shipping routes, neither we nor Europe can easily abandon the existence of this supply chain.

What we can do more is to seek a balance between cost and service in the new air routes, and incorporate more transportation forms into the international logistics system, such as air freight and the China Europe freight train. But no matter which method is used, it is impossible to perfectly or permanently replace the original sea transportation.

However, any new system formed as a result will have a deeper impact on the future of regions, cities, and even individuals. The focus of port cities and inland stations will change; The layout of infrastructure such as docks, warehouses, and warehouses will be re evaluated; The industrial foundation and talent distribution will also face new mobility.

But this issue will be more complex and profound, not something that can be explained in just one or two sentences this time.