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World Energy, retail, and food: Ever Given blockage threatens supply chains

21:34  26 march  2021
21:34  26 march  2021 Source:   washingtonexaminer.com

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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.

  Energy, retail, and food: Ever Given blockage threatens supply chains © Provided by Washington Examiner

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 become lodged between 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 weeks.

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.

How That Massive Container Ship Stuck in the Suez Canal Is Already Costing the World Billions of Dollars

  How That Massive Container Ship Stuck in the Suez Canal Is Already Costing the World Billions of Dollars $3 billion a day — and that's not factoring in the environmental tollAs backhoes and tug boats worked around the Panama-flagged Ever Giving’s 400-meter-long hull on Thursday evening, experts began to tot up the economic and environmental ramifications of a protracted obstruction. Meanwhile, vessel tracking data showed that some container ships had already started redirecting around the African Cape, a route that can add two weeks of journey length.

Just days into the blockage, shipping costs have exploded to 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.

SHIP WEDGED IN SUEZ CANAL COULD TAKE WEEKS TO MOVE AS IT COSTS $9.6 BILLION PER DAY IN LOST TRAFFIC

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, calculated.

“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.”

Suez Canal Remains Choked as Elite Team Tackles Stuck Ship

  Suez Canal Remains Choked as Elite Team Tackles Stuck Ship A huge backlog of vessels was building up around the Suez Canal amid warnings that the salvage team could need days -- or even weeks -- to prise out the giant container ship that’s blocking the crucial waterway. Work to re-float the Ever Given and allow passage for oceangoing carriers hauling almost $10 billion of oil and consumer goods continued without success on Thursday in Egypt. Tugs and diggers have so far failed to budge the vessel, and some experts say the crisis could drag on for several days. The Suez Canal Authority has temporarily suspended traffic along the waterway.

This satellite image from Maxar Technologies shows the cargo ship MV Ever Given stuck in the Suez Canal near Suez, Egypt, Friday, March 26, 2021. A maritime traffic jam grew to more than 200 vessels Friday outside the Suez Canal and some vessels began changing course as dredgers worked frantically to free a giant container ship that is stuck sideways in the waterway and disrupting global shipping. (©Maxar Technologies/AP) © Provided by Washington Examiner This satellite image from Maxar Technologies shows the cargo ship MV Ever Given stuck in the Suez Canal near Suez, Egypt, Friday, March 26, 2021. A maritime traffic jam grew to more than 200 vessels Friday outside the Suez Canal and some vessels began changing course as dredgers worked frantically to free a giant container ship that is stuck sideways in the waterway and disrupting global shipping. (©Maxar Technologies/AP)

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.

Delay on Suez Canal could cripple already struggling auto industry

  Delay on Suez Canal could cripple already struggling auto industry “Any slight delay in delivery could mean the production lines in Europe will grind to a halt,” said one auto industry expert.That would complicate matters for an industry troubled by shortages of semiconductors, as well as seating foam and other petroleum-based materials.

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.

Suez Canal Authority attempting to refloat Ever Given ship this morning, unclear if successful

  Suez Canal Authority attempting to refloat Ever Given ship this morning, unclear if successful Salvage crews are attempting to refloat the Ever Given container ship, which has been stuck for almost a week in the Egyptian canal, the Suez Canal Authority (SCA) said in a statement Monday. © Maxar Technologies/AP This satellite image from Maxar Technologies shows the cargo ship MV Ever Given stuck in the Suez Canal near Suez, Egypt, Sunday, March 28, 2021.

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 about two weeks longer 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, told 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.”

Ever Given is no longer blocking the Suez Canal, but Russia sees a long-term benefit from it being stuck

  Ever Given is no longer blocking the Suez Canal, but Russia sees a long-term benefit from it being stuck Russian officials capitalized on the canal's blockage to tout the Northern Sea Route, which Moscow wants to develop into a major shipping corridor.Even as crews worked to free Ever Given, Russian officials seized on the incident to tout the Northern Sea Route, an Arctic maritime corridor on which Moscow is betting big.

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 and blocked it with debris.

In 2004, the Liberian-flagged oil tanker Tropic Brilliance became wedged in the canal. It was removed after authorities pumped out 25,000 tons of oil, more than a quarter of its cargo, allowing it to be refloated.

A work crew using excavating equipment tries to dig out the Ever Given, a Panama-flagged cargo ship, that is wedged across the Suez Canal and blocking traffic in the vital waterway. An operation is underway to try to work free the ship, which further imperiled global shipping Thursday as at least 150 other vessels needing to pass through the crucial waterway idled waiting for the obstruction to clear. (Suez Canal Authority via AP) © Provided by Washington Examiner A work crew using excavating equipment tries to dig out the Ever Given, a Panama-flagged cargo ship, that is wedged across the Suez Canal and blocking traffic in the vital waterway. An operation is underway to try to work free the ship, which further imperiled global shipping Thursday as at least 150 other vessels needing to pass through the crucial waterway idled waiting for the obstruction to clear. (Suez Canal Authority via AP)

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 take weeks, 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.

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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.

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“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.

Tags: News, Suez, Trade, Commerce, Egypt, Shipping, Oil, Inflation

Original Author: Zachary Halaschak

Original Location: Energy, retail, and food: Ever Given blockage threatens supply chains

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.

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