Just how important is the Suez Canal to global trade?

Saturday, 27 Mar, 2021

Global companies are preparing for the effect that the canal's blockage will have on supply chains that rely on precise deliveries of goods.

Everybody has an opinion - and social media allows for those opinions to be shared globally and instantly.

Turkey can send its Nene Hatun vessel to help resolve a blockage on the Suez Canal, Transport Minister Adil Karaismailoglu said on Friday, amid a recent push by Ankara to fix its strained ties with Egypt. Giving a sample route, the company said: "Suez to Amsterdam at 12 knots is just over 13 days via the canal, or 41 days via the Cape".

The colossal ship, spanning 400 meters in length and 59 meters in width, ran aground on March 23, at 6 nautical miles from the southern entrance of the canal. In a Friday statement, the authority said it welcomed offers of worldwide support to help free the vessel, including one from The United States. It specifically identified the United States, which it said had offered "to contribute to these efforts", although the SCA did not say how.

An excavator attempts to free stranded container ship Ever Given, one of the world's largest container ships, after it ran aground, in Suez Canal, Egypt March 25, 2021.

In other words, the SCA's email inbox is full.

Elsewhere, the Ningbo Containerized Freight Index (NCFI) commentary reported that space from Asia to Europe was again "becoming tight", suggesting that spot rates would have risen next week regardless of the Suez Canal crisis. But the global supply chain was already severely stressed by the coronavirus pandemic, leaving little room for error.

As of Friday, a total of 156 ships were waiting at both ends of the Suez Canal for the Ever Given to be freed, said Leth Agencies. And you thought shipping accidents would never be fodder for late-night talk show hosts.

It wasn't immediately clear what caused the Ever Given to become wedged on Tuesday. Diggers and other machinery operating on the banks are also assisting.

Global supply chains were already stretched thin from the impact of COVID-19 on the shipping industry, and now the almost 19,000 vessels the Suez Canal hosts every year have to attempt to figure out alternative routes - most likely at great cost, and raising the prospect of higher inflation.

"The Canal is thus clear and ready to escort the vessel out of the Canal, once she has been successfully refloated", Leth Agencies said. But the blockage of such an important global trade route means the domino-effect ramifications of the Suez Canal being out of service could have far-reaching consequences.

The shipping index benchmark for LR2 vessels from the Middle East to Japan, also known as TC1, had climbed to 137.5 worldscale points as of early Friday, compared with 100 worldscale points last week, said Anoop Jayaraj, clean tanker broker at Fearnleys Singapore. A Dutch firm with expertise in salvage operations, also began to work with the authority on Thursday, with the focus on removing the sand and mud around the vessel's bow - an enormous task. Such an arrangement is customary, but the ship's captain retains ultimate authority over the vessel, according to shipping experts.

BSM said that dredger "can shift 2,000 cubic meters of material every hour". "The crew are working closely with all parties involved to refloat the vessel".

The price of oil struggles to retain the rebound from the monthly low ($57.25) amid the blockade in the Suez Canal, but the OPEC Joint Ministerial Monitoring Committee (JMMC) meeting on March 31 may sway the near-term outlook for crude if the group takes additional steps to regulate the energy market.

Evergreen Marine Corp., a major Taiwan-based shipping company that operates the ship, said in a statement that the Ever Given had been overcome by strong winds as it entered the canal from the Red Sea, but that none of its containers had sunk.