Busy hub: An oil tanker anchoring close to the Malacca Strait’s coastline. More than a quarter of global trade goods transport passes through this shipping lane. — Filepix
WHEN traffic through the Suez Canal ground to a halt in 2021, the extraordinary cost and disruptions to global commerce seemed overwhelming.
But 8,000km from the canals of Suez and Panama lie even more important shipping lanes, choke points that could cripple global trade should any disaster befall them.
More than a quarter of goods transport passes through the Malacca Strait, a 40km-wide stretch of water that separates Indonesia to the south-west from Singapore and Malaysia to the north-east.
By value, the 27.9% of merchandise sent around the world that traverses this body of water far exceeds the 16.6% that moves along the Suez Canal in Egypt, according to research by Professor Lincoln Pratson at Duke University’s Nicholas School of the Environment.
In a paper published in December in the journal Communications In Transportation Research, Prof Pratson painstakingly details trade patterns, shipping routes and the shortest paths across the oceans to assess the potential impact of closing any of the 13 choke points he identified around the world.
He used 2019 data as that is the most recent year in which trade could be considered “normal” before the Covid-19 pandemic disrupted global commerce, and ran the analysis on commerce between non-neighbouring countries because those that share a border are likely to use land routes.
Around 1,600km north-east of the Malacca Strait, swathes of the South China Sea are claimed by no fewer than seven nations, making military conflict the most obvious risk.
“The choke points estimated to carry the most trade in terms of both total value and total weight are the Malacca Strait and South China Sea,” Prof Pratson writes.
The South China Sea alone carries trade equivalent to 5% of global gross domestic product, which would make it the fourth-largest economy in the world.
Exactly how much trade transits the South China Sea is a much debated point.
The Washington-based Centre for Strategic and International Studies estimated the value at US$3.4 trillion for 2016, 36% less than other assessments for the same time period.
Prof Pratson puts it at US$4.1 trillion for 2019, with US$3.9 trillion going via the Malacca Strait.
There is some overlap, because goods pass through multiple sea lanes on the way to their final destination.
The precise number does not really matter.
What is important for shippers, manufacturers and governments is to understand the severity of the impact should a disaster happen.
The ripple effect from the complete closure of any waterway can be felt thousands of kilometres away.
When the Ever Given cargo ship shut down the Suez Canal three years ago, it added around nine days to a Taiwan-Netherlands trip, Prof Pratson notes, with the cost to global trade climbing close to US$10bil per day.
The 32km-wide Ombai Strait, 11,200km away – between Indonesia’s Alor Island and Timor – would suffer a 90% drop in traffic from a Suez closure.
Even the Gibraltar Strait that separates Europe and Africa – 3,200km north-west of the Suez – would lose 28% of shipping flows, by value.
But perhaps the biggest impact would be from a closure of the Malacca Strait or South China Sea.
Should maritime passage get halted here, the nearby and little-known Lombok-Makassar Strait – north of Bali – would see a 14-fold rise in trade flow.
We have yet to see whether this stretch of water has the capacity to carry such volume safely.
More than 20%, by value, of all mechanical machinery, electrical equipment, mineral fuels like coal, gas and oil, and rare metals or minerals pass through the Malacca Strait.
Similar figures apply to the South China Sea, while the East China Sea – connecting Taiwan with Japan, South Korea and China’s north-east – also ranks high.
Each of these three passages surpasses Panama and Suez, with only the English Channel and Gibraltar Strait holding similar importance.
The risks to these Asian waterways need not be confined to war – currently impacting the Suez Canal as Houthi rebels in Yemen fire missiles at ships passing through the adjoining Red Sea, and slowing trade through Turkiye’s Bosphorus, which takes traffic from the Black Sea where Ukraine is fending off a Russian invasion.
A drought, like the one that is hurting Panama Canal flows, will not dry up the South China Sea or Malacca Strait. But there are a multitude of other disasters that could hit maritime transport.
Think earthquakes and their resultant tsunamis; typhoons, which are common to the region; chemical spills and nuclear accidents that force ships to change course; or forest fires sending plumes of thick smoke across the waters, impacting navigation.
Even without one-time incidents, the region is already the most treacherous in the world.
A quarter of all ships lost in 2022 were in the area spanning South China through to Indonesia, according to analysis by Allianz Group.
Still, though tragic, the rare sunk or stranded ship will not much affect the trajectory of global trade.
What matters most is that the global system of logistics and transport, as it is now structured, is overly dependent on smooth and orderly flows in just a few of the world’s hot spots that make up a tiny fraction of the earth’s surface.
Just 21.5% of global trade does not pass through one of the 13 choke points.
This has not been a problem, so far. Supply chains have been resilient enough, with sufficient spare capacity along shipping routes, to allow the sector to get through relatively small crises unscathed.
But we need to be ready in case the planet encounters a major event.
The knock-on effects for port operations, global manufacturing and energy security could be devastating. — Bloomberg
Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. The views expressed are the writer’s own.
