Shipping line void the Suez Canal

Shipping lines seeking to reduce costs have often contemplated the historic trade route around Africa’s Cape of Good Hope, because it’s a move that would save them millions by avoiding the toll charges of the Suez Canal, but it depends on very low fuel costs and shippers willing to accept sailing transits extended by a week.

The perfect storm of the drop in oil prices – low-sulphur fuel went from 700 USD/ton in early January to now approaching 200 USD/ton – and lack of demand at Coronavirus locked down destinations has encouraged CMA CGM to ship via the Cape of Good Hope in both directions, entirely missing out the Suez Canal.

The first vessel to transit the Cape is the16,020 teu CMA CGM Alexander Humboldt, en-route to Port Klang in Malaysia on the FAL-1 service bypassing the Suez Canal, while the 15,000 teu CMA CGM Chile is in the Indian Ocean en route to Le Havre and will be the first westbound ship to make this route to Europe for many years.

Sea Intelligence CEO, Lars Jensen said that the trip is more than 3000 nautical miles longer and will add 5 days to the schedule, even with a 2kn speed increase.

The vessel will use 1000 ton extra fuel adding a cost of 200.000 USD to the trip, but saving the Suez Canal tolls of USD400K to 500K.

To prevent vessel re-routing the canal has a 45-65% discount scheme for USEC vessels and they have announced a 6% discount for European vessels but, as is evident with the CMA CGM routings that is not sufficient to deter re-routing and it is likely that other lines will follow.