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On Mar 23 2021 a huge 400 Metres long container ship; the Ever Given, en route to Rotterdam from China, got stuck in the Suez canal. As a result, the busy shipping lane passing through the Canal got choked.
Map-1: Blockage in Suez Canal
Source: Pub by The Hindustan Times 28 Mar 2021 quoting CNES/AIRBUS DS via REUTERS
Suez Canal, sea-level waterway running north-south across the Isthmus of Suez in Egypt to connect the Mediterranean and the Red seas. The canal separates the African continent from Asia, and it provides the shortest maritime route between Europe and the lands lying around the Indian and western Pacific oceans. In fact the distance shortened is more than 8000 km. A French-owned company built the Suez Canal between 1859 and 1869. For many years France and Great Britain together owned the canal. They agreed that the canal should be open to ships of all countries in times of both peace and war. But in 1956 Egypt took over the canal.It is one of the world’s most heavily used shipping lanes. The canal extends 193 km between Port Said in the north and Suez in the south, with dredged approach channels north of Port Said, into the Mediterranean, and south of Suez. The Suez Canal is an open cut, without Locks, and, though extensive straight lengths occur, there are eight major bends. The canal by the 1960s had a minimum width of 55 metres at a depth of 10 metres along its banks and a channel depth of 12 metres at low tide. In 2015 the Egyptian government finished a nearly $8.5 billion project to upgrade the canal and significantly increase its capacity.
Suez Canal – Kids | Britannica Kids … Ref : kids.britannica.com
Efforts made to clear the Blockage– Initially efforts were made to re-float the ship but efforts failed as the giant container ship was stuck side-ways. Leth Agencies, the canal’s service provider, tweeted on 28 Mar 2021 that the tidal conditions didn’t help the attempts of re-floating. After multiple failed attempts dredging was thought to be the next best option. While the dredgers continue to vacuum up sand from underneath the vessel, two additional tugboats, the Dutch-flagged Alp Guard and the Italian-flagged Carlo Magna have been called in to help the tugboats already there attempting to nudge the skyscraper-sized container ship. However, even that attempt has not yielded any positive results as yet. Now, as per the head of the canal authority, a third option is being attempted which entails unloading of the carrier. This, however, is a mammoth task as it entails the unloading of 18,000 containers from the 200,000-ton container ship and will need special equipment. It has been reported by the Canal Authority that the acquisition of that equipment has been authorised by the President of Egypt while the dredging to continue.
Impact of Blockage– Almost 300 ships are waiting to pass through. It needs to be noted that this route caters for the daily passage of about ten percent of global seaborne oil trade, a large volume of liquified natural gas (LNG) and petroleum, from Middle East to refineries and distributors in Europe. As per the last reports received about 16 fossil fuel tankers are stuck in the jam. Such a disruption in the energy supply is likely to squeeze supplies of crude and refined products from Middle East to Europe. Although initially the impact on oil prices was muted. Probably because it was thought that blockade would get cleared quickly and Pandemic COVID-19 and related problem of slow rollout of vaccines in Europe, has in any case impacted the demand of oil and gas in Europe. But as delay have dragged on, pressure is building. By the end of Mar. 25, oil prices were inching up. Market is continuously going up as probably in the assessment of the traders the blockade is becoming significant and not unlikely to get cleared any time soon. It may take few weeks for blockade to get cleared. The oil prices rose more than 4% on 26 Mar 2021. If the jam is indeed not cleared soon, the global oil market will face major shortages or upsets and ships will be forced to take the lengthier route via Cape of Good Hope which is about 10-12 days longer, riskier and also costly. Another option is to move crude through the Sumed Pipeline, which runs adjacent to the canal and has room to spare, though that choice also comes with added costs. Another supply which is likely to get impacted is supply of Naphtha which is the raw material for the manufacture of plastics. The plastic manufacturers in Asia will definitely feel the pinch because the blockade may result into escalation of prices of the raw petrochemical materials like naphtha, as 20 % of Asia bound Naphtha which breaks down to produce benzene is the key chemical in the manufacture of plastics is sourced through Suez Canal. As estimated by Lloyd’s list In monitory terms the blockage amounts to cost $400 million per hour and West bound traffic at roughly $5.1 billion a day, and eastbound traffic at around $4.5 billion a day. Thus the blockage is further stressing an already strained supply chain. That is why probably yet another option is to source the necessary supply from a different route altogether. One country which is not going to be unhappy about the blockade is Russia. Disruption of supply from this route is likely to help Russia to fill the gap in supply to Europe because of its oil and gas assets in Black Sea. However it is a tricky gamble for shipping companies, like choosing the right lane on a gridlocked highway: If the jam can be cleared within the next week or so, it would make more sense to just wait.
- The Hindustan Times dated 28 Mar 2021.
2. Lori Ann La Rocco, “Suez Canal blockage is delaying an estimated $400 million an hour in goods”, Pub by CNBC dated 25 Mar 2021.
3. A Reuters’ Report, “ Oil prices rise 4% over fears of Suez Canal blockage lasting weeks”, pub by Business Today dated 26 Mar 2021
4. A The Hindustan Times Report, “Suez Canal blockage is visible from outer space, here are the satellite photos” uploaded on https://www.hindustantimes.com/india-news/suez-canal-blockage-is-visible-from-outer-space-here-are-the-satellite-photos-101616764733271.html
- An ANI Report, “Efforts to dislodge ‘Ever Given’ ship, blocking Suez Canal, enter sixth day”, dated 28 Mar 2021uploaded on https://in.news.yahoo.com/efforts-dislodge-ever-given-ship-114336548.html
- Tim McDonnel, “Russia is in no hurry to see the Suez Canal re-opened” pub by QUARTZ dated 27 Mar 2021 and uploaded on https://in.news.yahoo.com/m/0d5dc5d0-4a5f-3443-b27f-8f68a4e9691a/russia-is-in-no-hurry-to-see.html