As of March 24, 2021 4:41 p.m.
The accident of the container ship “Ever Given” in the Suez Canal hits the economy at a sensitive point: It is one of the most important sea trade routes in the world. There is a threat of intensified delivery problems.
From Till Bücker,
A huge container ship has blocked one of the most important shipping routes in world trade. The “MV Ever Given”, a 400-meter-long and 59-meter-wide ship operated by the Evergreen shipping company, was unable to maneuver in the course of a sandstorm in strong winds, lost course and ran aground.
As a result, traffic jams from container ships formed on Wednesday both north and south of the Suez Canal, according to the ship radars vesselfinder.com and marinetraffic. The Bloomberg news agency reported more than 100 ships that wanted to pass the canal – but could not. What does this mean for the global economy?
Crucial for trade between Asia and Europe
The almost 200 km long Suez Canal is one of the most important trade routes in the world, around twelve percent of all international sea trade goes through the waterway. It connects the Mediterranean with the Red Sea. According to the Suez Canal Authority (SCA), almost 19,000 ships passed through the canal last year – more than 50 a day – with a total of more than a billion tons of cargo.
“The Suez Canal is definitely one of the arteries – if not the most important artery – for the global freight and goods trade,” says Vincent Stamer, trade expert from the Kiel Institute for the World Economy (IfW), in an interview with tagesschau.de. About 98 percent of all Container ships used the Suez Canal on their way from Asia to Europe or vice versa.
It is not yet clear when the shipping route can be opened again. The ship is stuck between the two banks of the canal in a single-lane section shortly before the port city of Suez, said the Egyptian Suez Canal Authority. It would take the tugs at least two days to get it afloat again.
Largest container ship wrecked in the Suez Canal
Alexander Stenzel, ARD Cairo, daily news 5:00 p.m., March 24, 2021
Millions in damage for shipping companies
“The short-term effects will mainly be felt by the shipping companies, because a day in the queue means around 100,000 dollars in damage, especially for the large ships,” said Stamer. If more than 50 cargo ships normally cross the Suez Canal, the loss amounts to five million dollars.
Accordingly, the Association of German Shipowners (VDR) is hoping for a quick end to the blockade. “The longer the lockdown and the longer the uncertainty lasts, the more drastic the effects of this lockdown will be,” said spokesman Christian Denso of the German press agency. The main problem is that nobody knows how long the “Ever Given” will block the channel – and it is therefore also unclear whether a detour is worthwhile. “It’s like if you are stuck in a traffic jam on your way to vacation and have to decide, I’ll take the diversion or I’ll wait in a traffic jam until it’s over.”
Oil prices react
Tankers are also affected by the blockade. “Everything that loads oil down there and goes to Europe and North America goes through the Suez Canal,” said Denso. In contrast to the Panama or Kiel Canal, there are no width, height or length restrictions there.
Supply worries were already causing the oil price to skyrocket. The price of Brent oil from the North Sea rose at times by 2.3 percent to $ 62.20 per barrel. The WTI price for US oil rose up to 2.6 percent to $ 59.23. Due to the rising number of corona infections and the restrictions, prices had collapsed on Monday. A significant part of the entire energy transport from the Middle East to Europe and the USA runs through the canal. Deliveries from the North Sea to Asia are also affected in the opposite direction.
According to the industry service TankerTrackers, tankers with crude oil from Saudi Arabia, Russia, Oman and the USA were jammed on both sides of the accident site. The ships together would have loaded around ten million barrels of oil – and thus more than ten percent of the daily international demand.
Whether prices will continue to rise depends on the duration of the blockade and the decision of the oil tankers to travel across Africa, says IfW expert Stamer. The detour via the Cape of Good Hope could cost the ships from Saudi Arabia or Iraq at 16 knots (around 30 kilometers per hour) speed, however, three more weeks. The canal shortens the sea route from Europe to India by around 7,000 kilometers.
Possible waiting times for individual goods
The industry is building on the fact that there is no threat of a longer route failure. On Wednesday it was possible to move the freighter, as the industry service provider GAC announced, citing the Egyptian canal authority. As soon as it is moved to a different position, ships should be allowed to sail again. However, the wind and the size of the ship make the tug’s work more difficult.
“If the Suez Canal were to fail for several weeks, there could well be waiting times for a few goods in German production,” Stamer said tagesschau.de. This applies above all to electronics, textiles and machine parts, which are mainly obtained from East Asian economies. Even if the situation eased, there was always a risk of delays in deliveries of goods.
All in all, the accident came at an inopportune time. “If container ships are now caught in the queue of the Suez Canal and tie up capacity, that would mean that existing problems will be exacerbated by the corona crisis on the world’s oceans.” For months the industry has been fighting against a surge in demand and a shortage of containers.