What Happened In The Suez Canal, And What Does It Mean For Global Trade?
A giant container ship under the name Ever Given ran aground in the Suez Canal in Egypt on the 23rd March 2021.
Here’s how it all unfolded:
Sailing under the Panamanian flag, the Ever Given was headed towards Rotterdam in the Netherlands from the Yantian district of China. The ship ran aground at around 7:40am local time. The chair of the Suez Canal Authority Lieutenant-General Osama Rabie blamed the incident on weather conditions.
“The accident probably occurred because of the strong winds and a dust storm that obstructed the vision” Rabie commented.
These conditions are thought to have caused the ship’s hull to deviate from its course, causing the super tanker to run aground.
The ship, operated by Taiwanese company Evergreen Marine, weighs a staggering 224,000 tonnes and is capable of carrying 20,000 containers. Its length of 1,312 ft enabled it to easily take up the width of the canal after being lodged in place.
Immediately after the accident, the Crisis Management Committee was formed under the leadership of the General Chairman of the Authority.
Eight tugboats were seen in action on Wednesday, most notably the Baraka 1 which has a force of 160 tonnes, to try and float and release the Ever Given.
A team from Boskalis, a Dutch firm specialising in salvage, started working with the canal authority to develop a plan to free the ship.
Dredgers were deployed, including a specialised suction dredger which is able to shift 2,000 cubic meters of material every hour, with officials anticipating that 15-20,000 cubic meters of sand likely to be removed.
The ship’s owners announced that they hoped to free the Ever Given by the evening of the 27th March.
Over the weekend, 14 tugboats pushed and pulled the Ever Given at high tide to try and dislodge it. The operation was able to move the ship 30 degrees left and right. Alongside the use of tugboats, diggers and dredgers were also being used to move the sand which the ship was lodged in. At this point 27,000 cubic meters, equivalent to 11 Olympic swimming pools, of sand had been moved.
Crews worked through the night using a large dredging machine under floodlights.
Salvage efforts were complicated after a large rock was found at the bow of the ship.
The Suez Canal Authority issued a statement saying that the ship had been “successfully refloated” and that attempts to move to Ever Given would resume that evening at high tide to restore the vessel’s original direction.
The CEO of Boskalis said that completing the operation would not be a “piece of cake”.
“The good news is that the stern is free but in our view that was the easier part. The challenge is still ahead, because you really have to slide the ship, with the weight it is carrying,” Boskalis chief executive Peter Berdowski told Dutch public radio.
Later that day, Berdowski confirmed that the Ever Given had been fully refloated and redirected at 15:05 local time “thereby making free passage through the Suez Canal possible again”. Officials expect the backlog to clear in three days.
By the time the ship was freed, over 422 vessels were waiting to cross the canal.
What is the impact on global trade?
The blockage has had severe implications, with around 12% of global trade, one million barrels of oil and around 8% of liquefied natural gas supposed to pass through the canal each day.
Subsequently, the disruption held up an estimated $9.6bn worth of cargo each day between Asia and Europe.
Some economists are sure that the Ever Given’s disruption of shipping through the canal probably won’t impact global trade for more than a few weeks however several industry-experts do not share this same belief.
The world’s largest shipping company, Maersk, believes that delays are more likely to take several months to resolve.
"Even when the canal gets reopened, the ripple effects on global capacity and equipment are significant and the blockage has already triggered a series of further disruptions and backlogs in global shipping that could take weeks, possibly months, to unravel," Maersk revealed in a statement on Monday.
The shipping giant had three ships stuck in the Suez Canal over the past week, with 29 of their ships waiting to enter the canal and 15 also redirected around the southern tip of Africa, adding on around 10 days to their journey. They carry goods for companies including H&M, Nike and Unilever.
Speaking to the Financial Times on Monday, Maersk’s CEO Soren Skou said that the jam, combined with supply issues related to the coronavirus pandemic, has forced companies to re-think their supply chains. The current ‘just in time’ supply chain method fails when issues such as this arise, with Skou beliving the incident will hasten a shift in the global supply chain towards a ‘just-in-case’ method, providing more leeway for global trade when supply chain issues arise.
Adding to concerns on the impact the incident will have on global trade, Secretary General of the International Chamber of Shipping, Guy Platten, has said that the “disruption is massive… Cargo will be late; the impact will ripple out to the rest of the world. Demand for ships will rise”. Further issues will also arise with ships missing their slot at ports to offload cargo, with perishable goods being particularly time-critical with making such slots.
Other experts who believe the impact will last far longer than a few weeks include David Smith, head of hull and marine liabilities at McGill and Partners, a London-based insurance broker. He said that there had been talk of the disruption costing $100m. He added that “the final bill – which will be made up of compensation for the delays, loss of revenue for the Canal Authority, potential damage to cargo and the cost of refloating the ship – is likely to be more expensive.”
The US is expected to be less impacted by the issues due to its placement in the supply chain. Ken Roberts, trade analyst, has said that “U.S. trade and the U.S. economy are not impervious but relatively safe from serious impact related to the Suez Canal being blocked…that’s because of how our imports get here, and from where, and how our exports find their ways overseas, and to where.” Shipments from Asia are received on the American West Coast.
In spite of this, imports from Europe may be delayed and the blockage will prevent empty shipping containers from returning to Asia, adding to a container shortage caused by rising demand for consumer goods during the pandemic.
The 422 vessels waiting to cross the canal included items such as 110 containers filled with Ikea furnishings, ships carrying a total of around 130,000 livestock as well as French oak headed for a timber company in north-west England after being reprocessed into flooring in China.
According to shipping analysts Lloyd’s List, up to 90% of the affected cargo was not insured against delays. As the incident is also likely to increase the cost of shipping, prices are sure to increase for the consumers of these shipped goods too.