High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Julian Lee and Adeola Eribake (Bloomberg) — The bulk carrier Wakashio was 11 days into a month-long voyage to Brazil when it hit a reef off Mauritius causing it to spill fuel into the island’s crystal clear waters, endangering baby turtles and unique plants in a nearby nature reserve. Given the vastness of the Indian ocean, why was the vessel there in the first place?
Part of the reason is simple geography. Mauritius and the nearby island of Reunion lie on the shortest straight-line route between the Strait of Malacca, which links the ports of Asia to the Indian Ocean, and the southern tip of Africa. That also makes it the route of choice for shipping between the huge markets and manufacturing centers of China, Japan, South Korea and the rest of Asia in the east, and the resource-rich regions of West Africa and Latin America, or the markets of Europe and North America, in the west.
“Mauritius is just on the ‘highway’ of international shipping,” said Peter Sand, chief shipping analyst at BIMCO, one of the world’s largest industry groups for shipowners.
In short, if a freighter is sailing between the eastern and western hemispheres, there’s a good chance that it will get somewhere close to the islands. The main alternative route is to navigate Egypt’s Suez Canal.
In the past 24 hours, more than 800 ships — from giant commodity carriers down to tiny freighters — sent position signals from the shipping lane that connects the southern tip of Madagascar to the northern tip of the Indonesian Island of Sumatra, vessel-tracking data observed by Bloomberg show. That compares with about 100 ships on a more southerly alternative route.
“Mauritius is bang on that route for all the ships coming out of Asia and heading into the Atlantic Basin going around the Cape of Good Hope,” said Richard Matthews, head of research at E.A. Gibson Shipbrokers Ltd. “They are just trying to find the shortest route.”
Just as in the 16th century, shipping routes today often tend to stick close to land. Satellite navigation systems may make it easier to pinpoint a ship in distress, but if that vessel is thousands of miles from the nearest shore, then getting specialized help to it in an emergency can take days.
Being closer to shore may allow ships to pick up internet signals, allowing crew members to contact family without needing to use expensive and limited satellite phones.
All that helps to explain why ships get within the vicinity of Mauritius. It doesn’t address why the carrier was in its precise location. That question, and many others, will now become a focal point as investigators figure out exactly what happened. Nor does it explain what steps the island nation may put in place to prevent such events in the future.
“Mauritius can put in place a safety zone which ships may not pass,” said BIMCO’s Sand. “Other nations have done so in other places.”
–With assistance from Kamlesh Bhuckory.
© 2020 Bloomberg L.P
Join the 67,640 members that receive our newsletter.
Have a news tip? Let us know.