Suez blockage: One stranded ship, one giant problem for global trade

Suez blockage: One stranded ship, one giant problem for global trade

Global trade continue to suffer loses as “Ever Given”, the skyscraper-size cargo ship remain stuck in Egypt’s Suez Canal, causing the inability of about 300 ships to use the key trading route for five days now.

The blockage has disrupted global supply chains, already strained by Covid-19 restrictions. But the ship’s 25 crew members, all Indian nationals, are reportedly safe and remain on board.

The Suez canal is a strategic asset for Egypt, providing revenue from tolls. Today, ships pay on average $700,000 to traverse the canal, one way.

Since the canal opened in November 1869, it has provided a shorter route between the Mediterranean Sea and the Indian Ocean.

Salvatore Mercogliano, former Merchant Mariner told RT that everyday the canal is closed, Egypt isn’t getting any toll money from vessels passing that route. He noted that container ships or tankers are not delivering food, fuel, or manufactured goods to Europe.

Also, goods are not being exported from Europe to the far East. “This is going to have a massive impact on production and availability of goods in Europe and in Asia,” he said.

Dredging to dislodge the mega ship

Meanwhile, dredgers are making frantic effort to dislodge the stranded 400 meter long vessel. They have so far shifted 27,000 tonnes of sand to a depth of 60 feet, according to statement from Egyptian official, Lt. Gen. Osama Rabie on Sunday.

Akatarian learnt that 12 tug boats have simultaneously performed pulling maneuvers from three different directions on Saturday. Two additional tugboats have been added to the mission Sunday.

On Tuesday, the ship became jammed diagonally across a southern section of the Suez Canal, one of the busiest shipping route in the world with an estimated $9.6 billion worth of daily marine traffic halted.

The canal is a 120-mile-long shipping link between the Mediterranean and Red seas that reportedly carries 10% to 12% of commercial shipping and about 2.5% of the world’s oil.

Reuters reported that a German insurer said delays could cost global trade $6 billion to $10 billion a week.

The canal is “strategically and economically one of the most important waterways in the world,” according to GlobalSecurity.org.

Egypt’s President Abdel Fattah el-Sissi had reportedly ordered the Suez Canal Authority (SCA) to prepare for all options, including taking some of the 18,300 containers off the ship according to the Associated Press.

Shoei Kisen Kaisha Ltd., the company that owns the vessel, had earlier said it was considering removing containers if other refloating efforts failed.

Bloomberg data show that the queue at the Suez canal included 40 bulk carriers hauling commodities ranging from crops to dry goods like cement as well as vessels carrying oil, fuel, and chemicals,. There were also eight ships carrying livestock, more than 30 general cargo vessels, and a water tanker.

‘Ever Given’ is a Panama-flagged and Japanese-owned ship that carries cargo between Asia and Europe.

The Associated Press reported that the blockade could affect oil and gas shipments from the Middle East to Europe. Syria has already begun rationing the distribution of fuel in the war-torn country amid concerns of delays of shipments arriving amid the blockage.

Reuters reported that shipping rates for oil product tankers nearly doubled after the ship became stranded.

If the blockage drags on, shippers may decide to reroute their cargoes around the Cape of Good Hope, adding about two weeks to journeys and extra fuel costs.

How the vessel ran aground

Investigation into how the vessel ran aground is ongoing. But initial investigation suggests that it was due to strong wind, not engine failure, and there have been no reports of pollution or cargo damage.

However, Egyptian officials did not rule out human or technical error.

Owners say high wind in a sandstorm pushed the ship sideways, wedging it into both banks of the waterway.

The bow is aground on the eastern bank and the stern is on the western.