As the Middle East teeters on the brink of wider conflict, Danish shipping giant Maersk remains optimistic that it’s not a question of if, but when, the vital Suez Canal will regain its prominence in maritime trade.
On November 19, it will mark one year since Yemen’s Houthi rebels hijacked the roll-on roll-off carrier Galaxy Leader in the southern Red Sea, forcing its crew at gunpoint to head to the Port of Al Hudaydah.
This brazen attack, captured in social media footage, prompted the liner trade to withdraw from the Suez Canal as Houthi activities escalated, leading to the largest naval response from Western nations since World War II.
In response to the heightened risk of attacks on vessels sailing south of the Suez, the shipping industry turned to longer routes, primarily around South Africa. This decision resulted in significantly longer east-west journeys at considerable cost.
Maersk argues that the additional capacity required for these longer routes will soon become redundant once the Suez Canal reopens.
The shipping industry’s capacity response to COVID-19-related disruptions and other unexpected events has led to a 4.6% increase in fleet sizes in deep-sea trades since mid-2022.
In contrast, deployed capacity has only risen by about 3%, according to maritime logistics consultancy MDST.
Consultancy firm Think ING predicts a substantial influx of new vessels in the coming years, with more than 700 ships expected to be delivered between 2023 and 2025.
This oversupply, once trade through the Suez normalizes, could have significant repercussions, as noted by Maersk’s COO Karsten Kildahl.
Speaking at a press conference at the Port of Felixstowe in the UK, Kildahl likened the situation to the chaos that will ensue when shipping lines and ports attempt to recalibrate their schedules and calling dates following the Suez’s reopening for Europe-Asia trades.
Kildahl mentioned that Maersk and its new alliance partner, Hapag-Lloyd, had thoroughly assessed this anticipated shift ahead of their vessel-sharing arrangement, Gemini, set to take effect on February 1, 2025.
However, he acknowledged that it was unavoidable to increase the number of vessels operating on the longer routes around the Cape.
The operational recommendations for round-the-Cape options, as highlighted by Gemini, involve 29 main-trade rotations supported by 28 transshipment services, utilizing a fleet of 340 vessels.
Kildahl emphasized that if the Suez Canal were to become significantly safer for east-west trade, at least 40 vessels could be removed from circulation.
MDST has indicated that increased scrapping of older vessels may be necessary to restore market balance. However, Kildahl believes that an “operational meltdown” may be on the horizon.
