World Energy, retail, and food: Ever Given blockage threatens supply chains
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Global trade has been unsettled after a massive container vessel became wedged in the Suez Canal and blocked passage, possibly for weeks to come.
The 200,000-ton behemoth known as Ever Given ran aground earlier this week when a powerful sandstorm packing winds in excess of 45 mph buffeted the ship and caused it to becomebetween the banks of the critical passageway. Since the incident, officials have been working to dislodge the vessel, although estimates about how long that might take vary from days to .
The passage handles 12% of all global trade, making the incident an immensely costly one for companies across the world and one that has the ability to produce ripple effects across the global economy. The Suez connects the Mediterranean and Red Sea at a “chokepoint,” a narrow stretch that much trade travels through, much like the Panama Canal and the Strait of Hormuz.
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Just days into the blockage, shipping coststo nearly four times what they were last year, according to Bloomberg. The effect on global supply chains is only made worse by the fact that the COVID-19 pandemic has already resulted in delays and shortages for shipping companies worldwide.
Since January, supply-chain disruptions have cost world trade more than $200 billion, and $6 billion to $10 billion will be added to that figure every week that the Suez Canal remains impassable, Europe’s largest insurer, Allianz,.
“The problem is that the Suez Canal blockage is the straw that breaks global trade's back,” authors of the study wrote. “First, suppliers’ delivery times have lengthened since the start of the year and are now longer in Europe than during the peak of the COVID-19 pandemic.”
A new Suez crisis: How a ship got stuck in the canal and what it means for global trade
A cargo ship has been wedged in the Suez Canal for two days, sealing off the waterway in a crisis that could have major consequences for global trade.The Ever Given has been stuck since Tuesday, along with hundreds of other ships bearing billions of dollars' worth of goods and energy supplies. Executives the world over are wondering when the canal can resume normal operations, even as the ship has triggered a great deal of jokes and memes on the internet.
The stoppage, which features nearly 250 vessels queued on both sides of the Ever Given, has also had a detrimental effect on the price of oil. One million barrels of oil pass through the Suez Canal each day, and as of midday Friday, the cost of brent crude was up nearly 4%.
“This is definitely a big deal,” Tori K. Smith, a trade economist with the Heritage Foundation, told the Washington Examiner.
“If this continues on too long, it could end up affecting oil trade. Not just between Europe and Asia, but world oil prices,” she said during an interview.
Tugs and dredgers try to free megaship blocking Suez Canal
Tugboats and dredgers were working Friday to free a giant container ship blocking Egypt's Suez Canal for a fourth day, forcing companies to re-route services from the vital shipping lane around Africa. The MV Ever Given, which is longer than four football fields, has been wedged diagonally across the entire canal since Tuesday, shutting the waterway in both directions. The blockage has caused a huge traffic jam for more than 200 ships at either end of the 193-kilometre (120-mile) long canal and major delays in the delivery of oil and other products.
Shoei Kisen Kaisha, the 1,300-foot vessel’s Japanese owner, has apologized for the affair and said the company is having a tough time working to dislodge the ship.
“In co-operation with local authorities and Bernhard Schulte Shipmanagement, a vessel management company, we are trying to refloat [the Ever Given], but we are facing extreme difficulty,” the owner said.
If the blockage lingers on, it could also influence inflation, with increased costs that could lead to higher consumer prices and inflation.
Bill Reinsch, the Scholl Chair in International Business at the Center for Strategic & International Studies, told the Washington Examiner that there could be a “huge impact” on the global supply chain if the blockage remains for a couple more weeks.
“It’s a major route, and it’s going to affect not just consumer commerce, but it’s going to affect oil and energy supplies going back and forth, which I think will have an impact on everybody’s economy,” he said.
Reinsch also highlighted the effect a lengthy blockage might have on retailers, particularly in the apparel industry, because weekslong delays could result in clothing companies being unable to update their stores to reflect the changing weather from winter to spring. “Everything is seasonal,” he noted.
Egypt's commerce reputation survives Suez blockage: analysts
The near week-long shutdown of the Suez Canal threw an uncomfortable international spotlight on Egypt, but experts see limited overall fallout for its commercial shipping reputation. The accident, in which a 200,000-tonne container vessel became wedged diagonally across the canal during a sandstorm, blocked a crucial shipping artery used for 10 percent or more of world trade. But fears that it could take weeks to refloat the behemoth proved unfounded. Six days into the crisis, after major operations involving a flotilla of tug boats and excavators dredging up sand, the Japanese-owned MV Ever Given was freed and taken to an unobtrusive anchorage.
Given the possibility of an extensive and expensive delay, some vessels have now begun rerouting around the Cape of Good Hope in South Africa. The fact that companies are already making that strategic decision shows just how bad the situation could be, given that a vessel traveling between Asia and Europe takes aboutlonger if it has to circumnavigate the entire African continent.
Not only are shipping delays associated with the two-week timing a concern when ships are rerouted, but the costs involved with moving vessels around the Cape of Good Hope are also much higher. According to GCaptain, rerouting 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.
There are also concerns about the effects the blockage may have on food. Places such as the Horn of Africa face high levels of poverty and are dependent upon food trade. Disturbances in the supply chain of grain could have a particularly bad effect there.
“If it’s a delay of a month or longer, it will put on a significant price pressure and reduce availability in some places,” Tim Benton, research director in emerging risks at Chatham House in London and a food security expert,Bloomberg. “There are lots of compounding issues. The global food system is already under pressure from [COVID-19]. And clearly, anything that adds a further straw to the camel’s back makes things bad.”
Egypt's Sisi promises investment to avoid another Suez closure
Egyptian President Abdel Fattah al-Sisi pledged Tuesday investment to avoid any repetition of the past week's closure of the Suez Canal as he paid a celebratory visit to the reopened trade artery. The promise came a day after the refloating of the giant container vessel MV Ever Given, which hit the eastern bank of the narrow shipping lane last Tuesday and became wedged diagonally across its span for nearly a week. "We will acquire all theThe promise came a day after the refloating of the giant container vessel MV Ever Given, which hit the eastern bank of the narrow shipping lane last Tuesday and became wedged diagonally across its span for nearly a week.
This isn’t the first time the Suez Canal, which first opened in 1869, has been brought to a standstill. In 1967, the Six-Day War began, trapping more than a dozen vessels inside and resulting in the closure of the canal for the next eight years. After the war, Egypt shut down the canal and rigged it with mines andwith debris.
In 2004, the Liberian-flagged oil tanker Tropic Brilliance became wedged in the canal. It was removed after authorities25,000 tons of oil, more than a quarter of its cargo, allowing it to be refloated.
Excavators and teams of tugboats have been working to free the ship, which is holding nearly $10 billion worth of goods, with little results. There are fears that the vessel is so deeply lodged into the banks of the Suez that it may require removing some of the cargo, a move that could, according to Peter Berdowski, CEO of dredging company Boskalis.
What does the future hold after the ship is dislodged? Smith, the Heritage economist, said that an incident like this doesn’t mean that the world’s shipping methods don’t work, but she said once the Ever Given is finally removed, there will likely be some introspection by the Suez Canal Authority.
How a dredger and a fleet of tugboats helped free the Ever Given ship from the Suez Canal
It took approximately six days to free the massive container ship from the Suez Canal after preventing an estimated $50 billion in global trade.The Ever Given became lodged in the side of the Suez Canal last Tuesday. Officials suspect the ship became stuck due to high winds and a large dust storm. A previous Insider report also revealed that the container ship was traveling nearly 5 knots faster than permitted in the canal, though experts explained that speeding up is a tactic used to better control a vessel during a wind storm.
She said it may investigate whether this was a dredging problem or if the Authority needs to limit the capacity of ships that can pass through the canal.
“All of these sorts of questions will be answered once we figure out the cause and get the ship moving,” Smith told the Washington Examiner.
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Suez Canal Ship Update as Ever Given Blockage Backlog Set to Finally be Cleared .
The last remaining 61 ships of the 422 that were caught in a backlog after the Ever Given got stuck will finally be able to continue with their journey.Officials at the Suez Canal Authority (SCA) said the last ships that were stranded after the massive vessel would pass through today, according to Reuters.