Tsunami Reshapes Shipping Lanes

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One of the hidden costs of the tsunami disaster in Southeast Asia has been the damage to the Malacca Straits, one of the most important trade routes in the world.

The channel between Sumatra and the Malay Peninsula that connects the Andaman Sea with the South China Sea is traditionally one of the most active shipping lanes on the globe. In fact, according to the Malacca Straits Research and Development Centre, as much as $1 trillion in cargo and services passes through it each year.

However, the Associated Press has reported that water depths in sections of the Straits have shifted dramatically in the wake of the Dec. 26 tsunami. Sections that were once more than 1,000 feet deep are now as shallow as 100 feet, slowing shipping as routes are recharted and changed. Moreover, thousands of buoys that served as navigational aids disappeared, and old shipwrecks were relocated and joined by new wrecks, meaning these all must be mapped anew.

So far this has caused a lift in international ocean-shipping rates, which had fallen sharply following November's decline in the price of oil. The Straits are the key connection between Europe, India and the rest of Asia and Australia. By using this route, Japanese petroleum shippers traveling from the Persian Gulf to Yokohama save tens of billions of dollars per year compared to alternatives, according to Malacca Straits Research.

If shippers now need to go much slower than normal through the Straits, the price to shippers will be passed along to customers, and will also show up as revenue improvements for the shippers themselves. And of course there are a limited number of ships available, so heightened demand should boost prospects as well, particularly for shippers that operate on the spot market.