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Keep the Suez Canal Open

Is the Suez Canal open? The short answer is yes. This matters for any electronics manufacturer — or anyone, really — trying to ship anything westward from Asia by sea.

The Egyptian port city of Suez has been a focus of demonstrations during the past week’s revolt against the Cairo government. But several sources, notably Bloomberg and {complink 7522|Thomson Reuters}, are reporting that the Suez Canal is still open. A Maersk Line official told the Wall Street Journal that communications cuts by the tottering Mubarak government have caused delays, and curfews have affected some scheduled crew changes. But for the most part, the shipping business appears only lightly affected by the past week’s dramatic events.

Egypt’s geography means its politics tends to affect life beyond the national borders. A report in Wired Magazine last year, citing data from Lloyd’s of London and others, argued the Suez canal was among the world supply system’s most critical sea links. The analysis looked at the number of ships that used the world’s sea cargo facilities, the value of the goods they carried, and the size of the vessels that docked. By that measure, at least, the Suez is the Earth’s second most-important port, after the Panama canal, and ahead of more modern facilities in places like Singapore, Shanghai and Barcelona.

It’s also undergoing an expansion, according to a report from Port Technology International, which says Suez plans to double its capacity. As planned, Suez will be the largest container port in the Mediterranean.

For electronics manufacturers, Egypt represents a market for both labor and customers, and several deals have been in the works. Japan’s {complink 5648|Toshiba Corp.}, reports Juro Osawa with Dow Jones, has announced it intends to continue with plans to open an LCD television production facility in Egypt next month, in a deal with local electronics manufacturer the El Araby Group.

A report by Robotics Wire, which tracks electronics manufacturing, said the plant could ship both components and finished products, looking toward 600,000 televisions this year and two million in two years. If true, the deal announced just two days before the anti-Mabarak protests began, would require that supply chains for parts to these factories and goods out of them continue to function. At least one large electronics manufacturer is expressing confidence in that.

Toshiba sold 15 million televisions last year. The new factory and the supply lines it depends on are part of the Japanese giant’s move to grab 15 percent of the Middle Eastern and African LCD market by the end of 2011, according to the Robotics Wire report.

11 comments on “Keep the Suez Canal Open

  1. DataCrunch
    February 1, 2011

    I would think it is in Egypt’s best interest to keep the Suez Canal operating (as best it can).  What we may see is a continued increase in the price of oil as uncertainty continues is Egypt and perhaps the rest of the Middle East.  Not welcome news especially while the US and most of the world are looking to bounce back from a recession.

  2. Jay_Bond
    February 1, 2011

    The Suez Canal is not only a life line to the world, but also to Egypt. These protests are in retaliation to a government that has not listened to the people, and the people want change. The Egyptian government is trying to remain in control, but also knows that they too rely on the canal being open to generate revenue for the country.

    Manufacturers and their suppliers need to keep a close eye on what's going on in case there is a temporary shutdown that could dramatically affect their pipeline. With the global economy trying to repair itself and continue growth, it would be a shame to see a setback due to the political unrest in Egypt.

     

  3. Eldredge
    February 1, 2011

    I wonder how much Toshiba factored general unrest in the region into their decision to build manufacturing capacity there. It may still turn out to be a great investment, but the uncertainty has increased some for the near term.

  4. eemom
    February 1, 2011

    The Egyptian government has made several questionable calls over the past week.  It seemed, in some cases, that they were trying to hurt the Egyptian people to the detriment of the entire Egyptian economy.  In his efforts to hold on to power, Mubarak has essentially brought the Egyptian economy to a screeching halt.  I am sure the government wants to keep the canal open but something tells me that Mubarak wants to be president even more.  This uprising is because Mubarak did not do the right thing by the Egyptian people and unfortunately, unless the US and other major forces step in, I'm not sure that Mubarak cares enough about the Egypt or its people to protect its economy.

  5. Anand
    February 2, 2011

    Good news is president has promised he will step down in September, but not sure if this assruance is sufficient for the people of Egypt.

    http://bit.ly/hEaQ2i

    I guess this is high time UN should wake up and do something. Because unrest in Egypt will not only affect egypt but the whole world.

     

     

  6. Mydesign
    February 2, 2011

        Marc, movement of electronic or other goods are very much necessary as a part of global supply chain process. Due to availability of raw materials, Economic advantages or cheaper labour availability, companies are forced to establish their foot print on certain locations across the globe. Even though Air freight and road cargo services are alternate way of shipment, majority still prefer ships for cargo services. This is because of considering the availability and cheaper economic or cost factors.

        As we know that Suez Canal is a major sea route, connecting the Middle East with rest of the world.  So any political instability in these countries is going to be effect the easy navigation through this region and we had seen the same thing during the Gulf war also. The same story is repeating with Egypt, since they are facing with some sort of political instability, they are not able to contribute or concentrate much for the costal security. Moreover, presence of ship looters and pirates also creating problems, for the shipment of the products through Suez Canal.

  7. Marc Herman
    February 2, 2011

    Funny you mention pirates. A number of sources are claiming that ships coming eastward through the canal have had difficulty coordinating with the various navies providing armed escort through the Gulf of Aden. I can't confirm the scope of those problems, such as they really exist. It would, though, be comical if among the supply chain actors affected by the overthrow of an Egyptian dictator were 1) Asian electronics suppliers and 2) high-seas pirates. Globalization can be fun after all!

  8. Mydesign
    February 3, 2011

        Marc, it’s a real fact, am not joking or making any funny statements.  Due to the presents of pirates, many countries had sent their Navys for safeguarding cargo movements. Even 06 months back also such an incident happens.

    http://www.msnbc.msn.com/id/30178013/ns/world_news-africa/

    A small online News cutting 

    “Navy captured 14 Somali pirates near the Gulf of Eden. Navy which had started its operations against the Somali pirates in June, 2008 met with a grand success on 28th Jan. when it was able to catch the 14 dreaded pirates and handed them over to the police to face the law. The navy also rescued 20 people who had been kidnapped by these pirates. It may be entioned here that the Somali Pirates are a menace to International merchant vessels and are notorious for kidnapping ships on high seas and then demand heavy ransom for the release of the ships and kidnapped personnel. USA, India, France and other countries had decided to fight this menace to safeguard the sea trade. The Indian Navy has launched a heavy patrolling in the Arabian Sea to protect its maritime interests”.

     

  9. Marc Herman
    February 3, 2011

    Toms, by all means I take the comment as seriously as intended. I mean funny in the sense of coincidental or striking, not in the sense of lighthearted. (As in, “Yes, it's a funny thing about that..” is rarely actually suggesting something is hilarious). Please forgive me for the wrong impression.

    The piracy issue crossing paths with the Egyptian political tumult is to me an example of how inter-connected seemingly unrelated events can turn out to be. That's sometimes curious to me. For people who work maintaining supply lines, it's more obvious how these events link to each other. However, to much of the world, I think, it's a surprise when events that seem discrete start to reflect each other's influence. In this case — the proximity of Egypt to Somalia — Geography is one of those issues that so often goes missing, and I'm not really sure why. A glance at a map shows how physically close the effects of piracy are to the effects of an Egyptian political crisis. But it's rare to read those links expressed clearly. I'd find it amusing, in a good sense, to see such themes emerging more in the conversation about Egypt. Amusing because when it does, it tends to arise in print as some clever or grand discovery, when it really is fairly obvious. At least, it is all but shouting its importance right there on a world map.

    I've written a little about piracy in the past. If you're interested, an example is here (sorry no link, you'd have to cut/paste the URL):

    http://trueslant.com/marcherman/2009/04/09/why-the-maersk-alabama-was-sailing-unescorted/

    Thanks as ever for commenting.

     

  10. Mydesign
    February 4, 2011

        It’s so kind Marc, Even I didn’t taken in that sense and hope nothing hurt you too. Thanks for the kind and detailed info about one of your previous work. 

        Pirates are really a true menace for international merchant vessels and cargo movements, especially in areas near to African continent.  They used to kidnapping ships on high seas and then demand heavy ransom for the release of ships and kidnapped persons. They are well equipped with high speed motor boats and advanced arms and weapons. Latest reports showing that International maritime community (USA, India, France and other countries) had decided to increase the patrolling due to the latest developments in Egypt, for safeguard the sea trade and to protect maritime interests.

  11. Ashu001
    February 27, 2011

    Marc,

    The Suez canal is one of the most important sources of Foreign Exchange for Egypt(alongwith Tourism and Gas exports).Now that Tourism is out of the question thanks to political uncertainty,this revenue  becomes even more important.

    So the Militiary will do whatever it takes to keep the Suez canal open.No questions about that.Its a question of justifying the legitimacy of militiary rule now.They can't be found wanting here.

    Regards

    Ashish,

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