Nations consider trade route alternatives as Malacca Strait nears capacity

FORUM Staff

Minutes after midnight on July 11, 2021, the bulk carrier MV Galapagos and the container ship Zephyr Lumos collided as the behemoths transited the Malacca Strait off the coast of southern Malaysia. The enveloping darkness of sea and sky would have been pierced by the stream of navigation lights from some of the more than 250 vessels that navigate the narrow passage linking the Indian and Pacific oceans daily to deliver much of the world’s fuel and other commodities.

The crash, which was blamed on a malfunction of the Galapagos’ steering system, gouged a hole amidships on the 225-meter-long carrier, halting its journey from eastern Australia to eastern India, according to industry reports. There were no injuries aboard the Malta-flagged vessel or the United Kingdom-flagged Zephyr Lumos, a 366-meter-long ship that had entered service months before and was en route from Singapore to the Suez Canal. But oil spilled from the gash on the carrier’s starboard, slicking the water.

The collision was a shuddering reminder of the precariousness of maritime chokepoints, where accidents, blockades, conflict or piracy could throttle global commerce. The funnel-shaped Malacca Strait, which separates the Malay Peninsula from the Indonesian island of Sumatra, squeezes to just 2.7 kilometers — roughly seven Zephyr Lumoses lined bow to stern.

About 100,000 vessels annually navigate the waterway, which is the shortest sea route between the oceans but only 23 meters deep in most places, according to the Economic Research Institute for ASEAN and East Asia. Their cargo represents about $3.5 trillion in trade, including liquefied natural gas and oil that accounts for about 90% of Japan and South Korea’s energy imports, and about 80 percent of the People’s Republic of China’s.

By 2030, however, shipping traffic is projected to exceed the strait’s capacity — a looming deadline that is focusing attention throughout the Indo-Pacific and beyond on identifying other trade routes. The United States, Allies and Partners assure economic prosperity via safe and secure sea passageways.

Alternatives to the strait have been floated almost since the port town for which it’s named developed as a major trading hub in the 16th century, including “a centuries-old proposal to dredge a canal through the Isthmus of Kra” on the Malay Peninsula, the Bangkok Post newspaper reported.

Without access to the Malacca Strait, which carries about three times as much traffic as the Panama and Suez canals combined, “nearly half of the world’s shipping fleet would be required to reroute around the Indonesian archipelago,” such as via the Lombok or Sunda straits, according to the U.S. Energy Information Administration (EIA).

Diverting through the Lombok Strait, for example, would extend voyages by an estimated 4,600 kilometers and 170 hours, spiking expenses by 20%. “Rerouting would tie up global shipping capacity, add to shipping costs, and potentially affect energy prices,” the EIA reported.

Partners such as Indonesia, Malaysia and Singapore seek to counter piracy and reduce collisions and groundings in the Malacca Strait by sharing information and conducting joint naval patrols. Meanwhile, other initiatives also aim to make headway in ensuring unencumbered commerce.

“Given these potential ripple effects, it becomes clear that maintaining the open flow of goods through chokepoints like the Strait of Malacca is vital not just for the adjacent countries but for the global community at large,” according to Inside Supply Management magazine, a publication of the Institute for Supply Management. “These challenges also present opportunities for industries and companies to reassess and diversify their supply chains, exploring new partnerships and routes to mitigate potential risks.

“Additionally, technological advancements, like improved cargo tracking and predictive analytics, can better prepare industries to anticipate and respond to disruptions more effectively,” the magazine reported in November 2023.

That same month, Thai Prime Minister Srettha Thavisin called for investment in a proposed $28 billion land bridge through southern Thailand to bypass the strait, the Bangkok Post reported. Thavisin said the 100-kilometer-long project, which would connect seaports on the Andaman Sea and Gulf of Thailand via road, rail and pipeline networks, would cut shipping time by four days and trim costs by 15%.

“The land bridge will be an additional important route to support transport and an important option for resolving the problems of the Malacca Strait,” Thavisin said in San Francisco, California, where he was attending the Asia-Pacific Economic Cooperation summit. “This will be a cheaper, faster and safer route.”

Such a project could appeal to Indo-Pacific nations — including Quad partnership members Australia, India, Japan and the U.S. — as an avenue for enhancing engagement in Southeast Asia while countering any attempts by Beijing to gain influence as a lender, according to a November 2023 article published by the Lowy Institute, a Sydney-based think tank.

The region is considered the “security gateway” for Australia, which relies heavily on maritime trade, the article noted. “Australia’s investment in such a development could offer an opportunity to deepen ties, create a new trade route, and decrease pressure on the maritime chokepoint in the Strait of Malacca, and potentially allow for deep-water port access on both sides of Thailand.”