Will Thailand’s Kra Canal actually save cost?

Shipment experts are unfazed by the possible impact from the proposed Kra Canal

By ALIFAH ZAINUDDIN

The recent push for the construction of the multibillion dollar Kra Canal in Thailand has raised some concerns over the proposed artificial waterway’s impact on Malaysian ports and the Straits of Malacca shipping lane.

Identical to the Panama Canal, the proposed US$28 billion (RM117.4 billion) Kra Canal will bypass the Straits of Malacca, one of the world’s busiest shipping lane and slash vessels’ travelling distance by at least 1,200km, or three days of sailing.

But the idea of commercial vessels skipping the Straits of Malacca, the lane which about 85,000 vessels sail annually, could pose a threat to Malaysia’s key ports.

Vessels may skip the straits and local ports for their travel from the Indian Ocean to the Pacific Ocean.

Shipment experts, however, are unfazed by the possible impact from the proposed Kra Canal, saying any traffic diversion from the straits to the Kra Canal would be subjected to cost, and the savings from the travelling time were minimal.

An industry player said the proposed 135km-long Kra Canal along the Thailand-Malaysia border will not result in substantial savings for ships transiting between Asia and Europe.

Currently, shipping lines that offer a weekly service between the two continents deploy a total of 11 ships in a 77-day cycle.

The industry player said if the Kra shortcut saved enough time to reduce the amount of ships deployed in a cycle, operating cost could be slashed significantly as 20,000 twenty-foot equivalent units containership consumed about 25,000 tonnes of fuel per day.

“But the Kra Canal will save only three to five days, not even a week, which is not going to remove one vessel from the service structure,” the industry expert told The Malaysian Reserve (TMR).

“It all depends on cost. What will be the price of running through the canal, as oppose to the savings derived from coming down south? The canal is going to cost a fortune.

“So, there must be a levy charged at Kra to recover the construction cost. It is not a public service,” said the expert.

He said in comparison, the Suez or Panama canals have been successful because the savings were considerable.

The opening of the Suez Canal in Egypt cut 8,900km or 10 days from a trip, which reduced cost by between US$250,000 and US$400,000 per transit based on the load factor.

Meanwhile, the Panama Canal, which bypasses the trip around South America, shortened shipping route by nearly 13,000km, or three weeks of sailing time.

In the case of the Kra Canal, the waterway may benefit smaller ships on shorter trade courses.

“Maybe on the short sea trades, it would have some savings because obviously, you are deploying smaller ships, but you would not want to build a canal with limits and spend more later to expand it,” the source added.

Still, it remains to be seen whether the Thai government will actually push ahead with the project. The idea of the Kra Canal has been mooted since the 17th century, a Thailand news outlet reported that the Thai Canal Association has a “strong intention” to push for the tangible feasibility study, regardless of which government is in power.

SERC Sdn Bhd executive director Lee Heng Guie said calls for the Kra Canal were mainly from private groups in Thailand, as well as China and Europe. But the Thai junta and the Chinese government have been quiet on the proposed gateway.

“It has been on and off, but the current prime minister, Prayuth Chan-Ocha, has previously said that he was not interested to realise the canal under his leadership,” Lee told TMR.

Apart from lack of political willpower, public opinions on the Kra Canal also remain divided.

The prospect of splitting the Muslim-majority southern province from Bangkok with the canal has raised security concerns, while the transformation of Kra into a shipping hub may have severe impacts on Thailand’s tourist hotspots.

“I think tourism dollars make more sense to Thailand than shipping,” he said.