What a Singapore Strait traffic jam says about the world economy

Ships in the Singapore Strait.
PHOTO: thisischriswhite.com

Flying into Singapore's Changi Airport, visitors often remark on the hundreds of vessels, from supertankers to freighters, anchored along the coastline. Why are there so many? What are they doing there?

A decade ago, the global recession created a maritime car park of apparent ghost ships in the Singapore Strait - vessels sat idle in the world's busiest shipping lane as companies were going bust or did not have enough business to justify their use.

A container ship arrives at Pasir Panjang port in Singapore.  Photo: AFP

Now there's a similar stockpiling of ships in the strait, but it's more like a traffic jam. A growing global population that is getting materially richer means a burgeoning demand for goods.

Acting as the link between the biggest consumer markets in Europe and the Americas and China, the world's largest exporter, the strait is one of global trade's most important stretches of water.

Nearly 100,000 ships pass through the 105km-long waterway each year, accounting for about one-quarter of the world's traded goods. Singapore's Ministry of Defence predicts shipping volumes to increase 29 per cent by 2025.

Major ports across Asia are at breaking point and it's often cheaper for shipping companies to anchor in the strait than dock in a berth, creating long lines of boats waiting around for anything from a few days to months at a time.

"A vast amount of world trade is coming through there, all the oil from the Middle East, all the iron ore into China, coal from Indonesia to India, it's an incredibly busy shipping channel. In terms of tonnage, [the] Singapore Strait is still the busiest in the world," said Tim Huxley, CEO of Mandarin Shipping in Hong Kong and one of Asia's top ship brokers.

"There's been about a 10 per cent increase in shipping [in the] last year, so there's more cargo being carried. They go there [Singapore] after offloading in China - Singapore is a convenient place to wait until they're told: 'Right go to Australia or go to Brazil.' It's like a staging post where they do repairs, refuel, then sail off."

Tim Huxley, CEO of Mandarin Shipping in Hong Kong Photo: Mandarin Shipping

Container ships on fixed rotation might only be asked to stop for a couple of days "to get back into sequence, a bit like aviation", he said. "But for bulk carriers and tankers, it's a lot more volatile, as to where the ships go to, where they load and how fast they go."

"It's not like years before where there were dozens of ships there because there was no work."

The Singapore Strait works more efficiently than other well known shipping passages - such as the Suez and Panama canals, which act as gateways to other continents.

"As long as the ships are moving, there's no bottleneck, you don't see queues here like in the Suez or Panama," said Jason Chiang, director of Ocean Shipping Consultants.

"If it was a road, it'd be 18 lanes in one direction, so it's about keeping on the move, if you don't move, then move over to the parking lane."

But not everyone follows the rules. Last year there were around 75 accidents or collisions. So far in 2019, one Dominican-registered supply boat has sunk, a cable-laying ship capsized after colliding with a tanker and a Greek-registered bulk carrier hit a stationary Malaysian vessel.

A still from a video of the collision between a Greek bulk carrier and a Malaysian vessel. Photo: Handout

The most notable accident in recent memory was in August 2017 when the USS John S McCain was involved in a collision with an oil tanker that killed 10 American sailors.

At its narrowest, the strait is only 1.5 nautical miles wide, making it a hazardous choke point for boats and tankers to navigate - especially if ships break the maritime "highway code" by parking in the wrong place, or sailing through areas that are out of bounds. There's also the global rise of sea pirates, who take advantage of idle vessels sitting around with minimal crew and lots of cargo.

Shipping companies point out that the incident rate is still tiny compared to the number of journeys, but security experts are worried that the issues aren't being treated seriously enough.

Collin Koh Swee Lean, a research fellow with the Institute of Defence and Strategic Studies' Maritime Security Programme in Singapore, said security in some areas of the strait "is definitely not as good as that offered in the ports".

"In fact, some of the sea robbery attacks take place in darkness in such areas," he said.

"The reason why collisions do take place is that the maritime geography of the straits is far from easy to navigate. There are tight channels [and] changes in climactic conditions [that] impact on visibility."

Dr Collin Koh Swee Lean. Photo: Dr Collin Koh Swee Lean

Another problem arises from the smaller boats and ferries that criss-cross the strait from the north and south, while the super tankers are moving back and forth, from the east and west. "Most of the time, it's been safe, but the risks of collisions are always there," Koh said, adding that the final factor to consider was how well trained ships' crews actually were.

"There [have] been calls within the industry for mariners to be properly trained and qualified. You may have all the electronic navigational aid but, ultimately, you still need properly trained and experienced mariners to ensure navigational safety," he said.

Part of the reason for this apparent lack of training is cost pressures, which are set to rise next year when all vessels will have to comply with new International Maritime Organisation emission laws limiting sulphur levels in fuel to below 0.5 per cent. According to the European Federation for Transport and Environment, an umbrella organisation for NGOs that promote sustainable transport, the shipping industry currently accounts for three per cent of global CO2 levels, which will rise to 15 per cent if no action is taken in the next 20 years.

To comply with the new emission laws, companies will either scrap old boats, use cleaner fuel, or build exhaust gas cleaning systems - known as scrubbers - on existing vessels to eradicate almost all harmful emissions, which is the most popular and least expensive choice.

Faig Abbosov of the European Federation for Transport and Environment.  Photo: Transport & Environment

Huxley, of Mandarin Shipping, predicts the new regulations will "disrupt the market".

"It will make a difference. Older, less efficient ships, which burn sulphur will be pushed out, in place of modern ships. It's all good for the environment, but at a great expense," he said.

Chiang, of Ocean Shipping Consultants, is more bullish. "It will drive up the costs of logistics, but I don't think the small ships will go out of business, they will try and comply," he said.

Faig Abbosov, shipping officer at the European Federation for Transport and Environment, said the biggest problem will be regulation, as oceans are vast and hard to police.

"Some members of the industry have proven to be quite inventive in violating the environmental rules: a magic pipe, sulphur rule non-compliance, scrapping ships in environmentally and socially disastrous shipyards," he said.

"In general, the sector suffers from [a] 'collective action' problem, if one company wants to go it all alone and others don't follow, it might lose money. Therefore, we need strict regulations to ensure a level playing field and sustainable transport."

Despite these obstacles, the shipping industry has no clear rival. A container ship can carry 800 times more than a Boeing 747 and the global rail network is still limited in scope.

"The only development is rail, which has been built from China to Europe, but it's heavily subsidised, and it's not taken cargo away from the sea, but the air," said Chiang.

"Over the coming years, it [shipping] will always be the most popular, as it's simply a lot cheaper."

This article was first published in South China Morning Post