While horns blared in celebration of the Ever Given finally being dislodged from the Suez Canal, the fallout from the holdup is growing.
The Ever Given, which is owned by Japanese company Shoei Kisen Kaisha and operated by Taiwanese transport company Evergreen Marine, first became lodged between the banks of the Suez Canal last Tuesday. It was finally freed on Monday after an effort involving more than a dozen tugboats and dredgers that were making use of Sunday’s full-moon high tide.
Ever Given
The blockage led to a massive snarl of traffic and has cost $9.6 billion in trade each day, which amounts to $6.7 million per minute, according to shipping journal Lloyd’s List. Supply chains were further disrupted (they are already reeling from COVID-19 issues), and Europe’s largest insurer, Allianz, calculated that between $6 billion to $10 billion would be added every week the ship was stuck to the $200 billion in global trade costs since January.
After the Ever Given was dislodged, it meandered its way toward Egypt’s Great Bitter Lake, which is a large body of water located near the middle of the canal that is often used for ships to pass one another. The Ever Given reached the lake Monday evening to be anchored and undergo inspections.
CONTAINER SHIP STUCK IN SUEZ CANAL FREED
The Suez Canal Authority estimated that it could take around a week to clear the queue of ships. Meanwhile, shipping agent GAC predicted it could take three to four days for the blockage to be cleared and traffic to resume as normal.
As of midday on Monday, 193 vessels were stuck at Port Said in the north of Egypt, and 201 were anchored at the southern seaport city of Suez. There were an additional 43 ships waiting in the Great Bitter Lake.
Late last week, some had predicted that it could take weeks for the Ever Given, which is one of the largest container ships in the world, to be freed. Some shipping companies made the calculus that it would ultimately be more cost-effective to reroute their vessels around the Cape of Good Hope in Africa. Making the shift adds up to two weeks to voyages and burns more than 800 metric tons of fuel for Suezmax tankers, the term used to describe the largest vessels that have the ability to traverse the Suez Canal, which handles about 12% of global trade.
Ever Given Jam
The largest shipping company in the world, Denmark-based Maersk, said on Monday that it had already rerouted 15 of its vessels toward the southern tip of Africa and is “currently recalculating” whether it should turn those ships back around to their original route through the Suez Canal.
“Even once the Ever Given is out of the way, and the convoys resume, it will still take many days to clear the backlog of vessels at each end of the canal, then a week for the westbound container ships to reach ports in north Europe,” Greg Knowler, senior European editor at IHS Markit’s Journal of Commerce told Bloomberg. “That could see the Suez ships arriving around the same time as the dozens of vessels rerouted around Africa.”
Another fear about the blockage centered on energy concerns. The longer the Ever Given remained stuck, the worse of an effect it would have had on global energy markets. There were fears that not only would the oil trade between Europe and Asia be affected but also global oil prices. Brent crude oil dropped more than 1% immediately after the vessel was set free.
Nick Loris, an economist at the Heritage Foundation who focuses on energy and environmental policy, told the Washington Examiner that because the ship was refloated in less than a week, the overall effect on energy prices will be “pretty marginal.”
“We saw oil prices increase about 3% last Friday when the cargo ship was still stuck, and there was no definitive end in sight,” he said. “But oil prices have already dipped on the news that the ship is now refloated and vessel traffic through the canal is reopening.”
“There will be some residual effects on supply chains and shipping rates, but that won’t be the dominant driver of the direction oil prices head,” Loris said.
Oil tanker company shares took steep losses after the 200,000-ton Ever Given was finally pried from the Suez. Teekay Corporation shares fell more than 10% as of Monday afternoon, Frontline Ltd. dropped 9%, and Scorpio Tankers took a 7.4% tumble.
Among the hundreds of ships stuck in the Suez queue are some 20 vessels holding tens of thousands of animals. Animal advocacy groups have worried that food rations aboard the ships could be running low as the days spent anchoring wear on. Romania has 11 of those ships, containing 105,727 sheep and 1,613 cattle, according to Romania’s veterinary watchdog, which added that steps have been taken to prioritize the vessels. The watchdog also said that Egypt has provided supplemental food and water for the animals.
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The Egyptian economy itself also took a hit from the six-day incident. Before the pandemic, trade passing through the canal accounted for 2% of Egypt’s gross domestic product, according to Moody’s, and the Suez Canal Authority chairman said over the weekend that it was losing up to $15 million every day the canal is blocked.
