Maritime Trade to Slow Down After Ship Blocks Suez Canal

Paris, March 24 (AFP/APP): Maritime trade will slow down for days after a giant container ship got stuck sideways in the Suez Canal, causing a bottleneck in one of the world’s busiest shipping routes. Here are questions and answers about the incident and its consequences:

What happened?

The Taiwan-run MV Ever Given had sailed from Yantian, China, and was heading to Rotterdam, Netherlands, when it became lodged at an angle across the canal on Tuesday. The Suez Canal Authority said the 400-metre (1,300-foot) long and 59-metre-wide ship was caught in a gale-force sandstorm which affected the captain’s visibility.

Tug boats worked Wednesday to free the Ever Given and analysts say it could be moved out of the way in a matter of hours, but traffic could nevertheless be disrupted for a few days. Dozens of ships were blocked by the Panama-flagged ship, but historic sections of the canal were reopened in an effort to ease the traffic jam. Ships sailing from the Mediterranean were able to travel south. But broker Braemar warned that if the tug boats are unable to move the ship, some containers may have to be removed by crane barge to lighten the vessel and “this can take days maybe weeks”.

Why is the canal important?

The canal was widened and modernised several times to accomodate new ships since it was inaugurated in 1869. It is responsible for 10 percent of global maritime trade. The waterway drastically shortened travel between Asia and Europe: The Singapore-to-Rotterdam route, for example, is 6,000 kilometres and up to two weeks shorter than going around Africa.

It is an “absolutely critical” route because “all traffic arriving from Asia goes through the Suez Canal,” said Camille Egloff, a maritime transport specialist at Boston Consulting Group. “If it doesn’t go through the canal it has to go via Cape of Good Hope”, at the southern tip of Africa, Egloff said.

The canal was widened again in 2015 to allow supersized cargo ships like the Ever Given to use the route. A project is under way to double its capacity by 2023 to allow around 100 ships to use the canal per day, compared to 50 today.

Is there a shortage threat?

While traffic has slowed down, there is little risk of shortages in goods. “There are existing stocks. If you look at oil supply, it is only the one from the Middle East and we have other supply sources,” Egloff said.

Braemer said that, if it takes more than a week to free the passage, then ships could take the alternative route around the Cape of Good Hope, which would add eight to nine days for a voyage between Shanghai and Rotterdam, for example. The extra days “will be problematic for cargo already on the way” but it “can be compensated for in the longer-term by means of ordering cargo earlier than normal,” it said. But there could be an adverse effect on certain sectors.

An existing shortage of semiconductors has already disrupted production of cars that rely on the technology. And the deputy director general of the Federation of German Industries, Holger Loesch, said the blockage exacerbates an already “tense situation in the international transport of containers”. Egloff said: “There will be domino effects in European ports in the days to come.”

Will prices of goods rise?

The effect on prices “is likely to be small and transient, as there are alternative sources and shipping routes for crude and products,” said Bjornar Tonhaugen, head of oil market research at Rystad Energy. “But if the blockage lasts for more than a few days, it could impact prices more and for a longer time,” he said.

Oil prices soared on Wednesday as the ship remained stuck in the canal. Diverting ships to the Cape of Good hope is not likely to change liner pricing significantly as there is strong demand in Asia-Europe trade, according to Braemar.

“We expect freight rates to be maintained at current levels regardless of potential route diversion,” it said.

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