The Suez Canal, Maritime Chokepoints & The South China Sea

The Suez Canal, Maritime Chokepoints & The South China Sea

Written by Mark Wright. 

The recent blockage of the Suez Canal by the Ever Given container ship brought global attention to the importance of maritime chokepoints. While the international community has witnessed the importance of chokepoints through historic threats the in the Suez Canal, the Strait of Hormuz, and the Panama Canal, the Ever Given blockage should cause renewed concern. While those examples are extremely important in the international supply chain, they pale in comparison to the potential political risk in the South China Sea. Recent tensions between China and the United States, as well as other nations such as Taiwan, Japan, Vietnam and the Philippines, put in play maritime chokepoints that could bring the global supply chain to its knees necessitating companies, and nations, reexamine how to mitigate that risk.

The Ever Given, which is operated by Taiwanese shipping company Evergreen, was grounded for approximately six days, stalling shipping that accommodates up to 13% of maritime trade and 10% of oil shipments. The Suez is vital for the Asian to European trade route. Maersk (Danish logistics company) and its partners for example had 32 ships they operate waiting at the Suez Canal as a result of the disruption. One source estimated that it would take 6% of container shipping capacity to accommodate sustained blockage of the waterway. Rerouting shipping assets around the Cape of Good Hope in South Africa can add an additional 15 days. 

However, it is important to keep in mind that the Ever Given grounding is likely the result of an accidental blockage that was resolved in a relatively short timeframe of a week. Maritime chokepoints near the South China Sea and East Asia are more likely to result from international conflict, which is inherently uncertain and potentially lengthy. The Strait of Malacca, the Korean Strait, and the Luzon Strait are particularly vulnerable to political conflict, whether rumored or actualized. These chokepoints are vulnerable to the direct and indirect effects of China’s political and economic rise. It has been estimated by UNCTAD (UN Conference on Trade and Development) that 60% of maritime transport passes through Asia and 33% through the South China Sea.  

Since China is reliant upon access to the Indian and Pacific Oceans for continued growth, conflicts with other nations in these areas are a near certainty. The United States has sided with Japan, Taiwan, Vietnam and the Philippines, among others, to deter China’s claims and efforts to gain control of islands in the area that provide leverage related to navigation, fossil fuels and military advantage. China has made territorial claims to 90% of the South China Sea. While an international court rejected those claims, the nation has taken steps to expand its control through asymmetrical means. Besides building upon actual islands as well as conducting military exercises near challenged territories, China has defended the presence of approximately 200 fishing vessels arrayed in territorial waters of the Philippines. These actions, combined with recent combative exchanges with the U.S. diplomats, suggest China is intentionally pushing forward against current conditions.

During the Trump Administration, the U.S. openly challenged China policy in trade and international shipping through a variety of means. While most political observers assumed the Biden Administration would take a step back in order to calm relations between the two powers. Certainly, that assessment proved correct in agricultural trade, but in other areas, the U.S. has sent different signals. For example, the U.S. Indo Pacific Command proposed a new fleet and an additional $27 billion in spending over five years to enhance deterrence against China. President Biden also proposed greater cooperation among the U.S., Australia, Japan and India as a China deterrence.  Combining those proposals with other testimony before Congress, along with the acrimonious diplomatic meeting mentioned above, it suggests that political tension will increase in the coming years and may arise to a level not seen since the Cold War.  

While none of the events mentioned suggests conflict and disruption is inevitable, they should give businesses reason to be concerned about the international supply chain. The arrival of new administrations in D.C. does provide opportunities for strategic positioning by the U.S. and its adversaries or partners. Regardless, international conflict can ignite over unexpected events. Since Beijing is hosting the 2022 Winter Olympics, there have been some comments suggesting the U.S. and its allies may boycott the games over human rights abuses in China. It is possible those decisions will provide insight about the future of U.S.-China relations. It is difficult to see the two nations not escalating into a Cold War environment if there are boycotts. It is also difficult to imagine there will not be maritime disruptions in and around the South China Sea if those tensions continue to intensify.     


Categories: Insights, Under The Radar

About Author