Two thousand years ago, the Silk Road was the epicenter of global commerce and trans-cultural diffusion. Asian and European traders traversed the Ancient Near East, over land and by sea, bringing China's silk and spice trades to markets as far afield as Mediterranean Europe.

 

The wild current of commerce rocked the cradle of civilization, consequently hastening and amplifying the exchange of information between East and West.

In our times, U.S. shippers have attempted to anticipate, tame, and redirect this free flow of information and trade across multiple geographic zones, operational silos, and transportation modes to more efficiently and economically match supply to demand.

 

But with capacity and congestion constraints threatening the efficacy of Pacific Rim shipping, and as low-cost manufacturing gradually penetrates deeper into Southeast Asia, the old Silk Road is evolving anew.

At the center of this emerging trade paradigm is a 19th-century relic as timeless as the Silk Road itself. While Egypt's Suez Canal has served as a primary corridor for Middle East trade over the past 100 years, and more recently tanker and container passage between Asia and Europe, its role in U.S. supply chains has been relatively inconsequential. Until now.

"As container volumes continue to grow and trade channels such as the Panama Canal become overburdened, shippers are struggling to eliminate variability from their supply chains," says Gene Seroka, vice president Middle East Region, for global service provider APL and APL Logistics.

 

"The Suez Canal is wider and less constrained than Panama so it is an excellent alternative for products moving to North American destinations via the East Coast."

In turn, the once inward-focused Suez Canal is growing by leaps and bounds to capitalize on shifting trade patterns. As U.S. import volumes drop and Asia-Europe shipping continues to swell, carriers are reallocating capacity to accommodate demand. In 2007, the waterway posted a 20-percent increase in revenue as prices rose and transits increased.

 

Importantly, the number of container ships journeying through the Suez grew 10.6 percent to 7,718 vessels, versus 6,974 in 2006. Since 2002, container ship transits have increased 70 percent.

Equally significant, U.S. East Coast container ports have seen considerable spikes in container throughput and are ramping up facility and infrastructure investments to handle expected growth. Savannah, by example, had a record year in 2007, handling more than 2.6 million TEUs - an increase of more than 20 percent over the previous year.

Nearly two-thirds of Asia-U.S. trade still arrives via the West Coast, but shipments have dropped about 30 percent in 2008, according to Gihan Rashad, marketing manager, GAC Egypt, a regional arm of the Dubai-based global logistics company.

 

Realizing this steady trade growth, the Suez Canal Authority is planning to provide incentives to lure more container ships to the area. Beyond that, U.S. shippers are eager to explore all-water transportation options that circumvent West Coast and even Panama Canal congestion and capacity constraints.

"More than 18,000 vessels crossed the Suez Canal last year compared to an annual average of 14,000 through the Panama Canal," says Rashad. "The Suez Canal can handle the biggest container ships carrying up to 14,000 TEUs, which is nearly 190,000 tons of manufactured cargo weight. This is almost triple the Panama Canal's current capacity."

While the Panama Canal Authority is in the midst of an expansion project to build a third set of locks (expected to be completed by 2015), growing interest in the Suez has created an investment boom with new container hub ports emerging throughout the Middle East.

"The Suez Canal Container Terminal was built in Portsaid, Egypt, at the northern tip of the Canal and plans to have a 5.1 million TEU capacity by 2011," adds Rashad. "APM Terminals (Denmark) operates 60 percent of the terminal. A series of free zone areas, including logistics and distribution centers, are planned to complement the terminal."

Additionally, Dubai Ports' acquisition of the Sokhna terminal at the southern entrance of the Canal heralds further expansion of the facility's capacity.

Meanwhile, U.S. ocean carriers and ports are duly making investments and inroads in the region as the pace of trade picks up.

 

In May 2007, APL debuted its Suez Express service from South Asia. The weekly service includes stops in Singapore, Colombo, New York, Charleston, Savannah, Norfolk, Jebel Ali, Port Kelang, and Singapore. Transit time from Singapore to New York is 21 days, and 24 and 25 days to Charleston and Savannah, respectively.

"Transport times to the East Coast through the Suez are considerably faster than if transiting the Panama Canal. The Suez Canal is also highly competitive with cargo crossing West Coast gateways," says Seroka.

He believes high-value cargo shippers can benefit most from the Suez gateway's  increased dependability and capacity, which translate to shorter turnaround times.

"Reliable transit times through the Suez Canal can eliminate the uncertainty connected with shipments discharged at U.S. West Coast ports and transported cross-country via congested intermodal rail," Seroka observes.

As further testament to the Suez Canal's potential, APL, which has been serving the Middle East for more than three decades, recently restructured its footprint in the region, transitioning from agency to fully owned status in Saudi Arabia/Bahrain and Egypt.

"While we expect significant growth in our core container shipping business, we are particularly focused on extending APL Logistics' value-added supply chain services," Seroka reports. "The establishment of our own operation in Saudi Arabia earlier this year is indicative of this commitment."

Elsewhere stateside, the Georgia Ports Authority recently signed a memorandum of understanding with the Suez Canal Authority to jointly promote all-water shipping between the Asia/Indian Subcontinent and the Port of Savannah.

 

The agreement calls for concerted efforts to expand international trade by supporting market presences in the United States and Egypt and with common customers, as well as to stimulate the exchange of operations and IT information and expertise.

Last year alone, 67 percent of the port authority's total increase in trade, or an additional 296,989 TEUs, was largely a result of doubling its Suez services.

In light of soaring transportation costs, fresh interest in the Suez Canal and the opportunities presented to shippers eager to reroute Asian-origin shipments through a conceivably faster, more reliable, capacity-flush pipeline may yet give businesses further incentive to reconsider global supply networks. For Seroka, it's a foregone conclusion.

"The increased use of the Suez gateway has affected sourcing strategies because it offers more rapid access to fast-growing sourcing and destination markets such as South East Asia, South Asia, and the Middle East," he observes.

Only time will tell how this recent shift in transportation and sourcing strategy will impact long-term supply chain dynamics. But for the new Silk Road, and its modern-day merchants, time is on their side.