Suez Canal blockage drags on after huge container ship runs aground

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Frantic efforts are under way to unblock the Suez Canal after one of the world’s largest container ships ran aground, severing a vital trade artery and threatening to disrupt global shipments for days.

The Ever Given container ship, which is almost as long as the Empire State Building is tall, is wedged across the southern end of the canal, with tug boats engaged struggling to free it.

Every day, about 50 vessels sail through the 120-mile long Suez Canal. It is a key artery handling at least 10 per cent of global seaborne trade and a similar amount of oil shipments, leading to fears that a prolonged shutdown could disrupt supply chains worldwide.

Taiwan-based Evergreen Marine, which operates the 220,000-tonne vessel, on Wednesday said the ship had entered the Suez Canal from the Red Sea on Tuesday and became stuck after being blown off course.

Bernhard Schulte Shipmanagement, the technical manager of the container ship, said that despite earlier reports, the boat remained stuck on Wednesday afternoon in Egypt and “initial investigations” had ruled out “any mechanical or engine failure as a cause of the grounding”.

Leth Agencies, a transit agent, said two dredgers were en route to the site and were expected to begin work in the evening to assist the rescue effort. VesselsValue said that by Wednesday afternoon almost 100 vessels were at anchor waiting to transit the canal.

Animation showing how a grounded container ship blocks Suez Canal

While officials in Egypt said they were hopeful that the Ever Given would be freed shortly and the canal reopened, the oil market was still spooked by the closure. Brent crude, international oil benchmark, rose almost 6 per cent to $64 a barrel, reversing part of its recent slump.

Samir Madani at TankerTrackers said about 13m barrels of crude and petroleum product shipments had backed up at the entrances of the canal by Wednesday afternoon.

Apart from crude flowing from the Middle East to Europe and North America, the canal has become a large transit route for oil from Russia to Asia in recent years.

“The canal is a key chokepoint for global trade,” Madani said. “If they can free the vessel quickly then the impact will be minimised but any prolonged blockage would have severe consequences, from affecting oil prices and shipping rates to forcing container vessels to take the much longer route around Africa.”

The canal, which was built between 1859 and 1869 to connect the Mediterranean to the Red Sea and Asia is also a key route for consumer goods and bulk raw materials. Almost 50 per cent of the vessels that passed through the canal in February were container ships, according to the Suez Canal Authority.

Osama Rabie, head of the SCA gave no timeline for when it might be freed.

Brokers and shipping analysts said the blockage threatened to cause backlogs at ports in Europe for days and exacerbate the shortage of containers in Asia that has led to surging freight rates.

Bar chart of Net tonnage by ship type, Feb 2020 (m) showing Roughly half the tonnage that passes through the Suez Canal is on container ships

“It’s a massive problem as literally everything from Asia to Europe comes through there,” said Philip Edge, chief executive of UK freight forwarder Edge Worldwide Logistics, who has goods held up.

“The longer this lasts, the worse it gets,” said Lars Jensen, chief executive of Seaintelligence Consulting.

Jensen added that “this has the potential of creating bottlenecks in European ports” next week, as delayed vessels idle at ports at the same time as those arriving on time from elsewhere, while also risking delays to the return of desperately needed containers to China.

Peter Sand, chief shipping analyst at Bimco, said there were no signs yet of vessels being redirected around the Cape of Good Hope but he was “sure we will see some redirection due to risk management” by shipping companies.

Ranjith Raja, head of Middle East and north Africa oil and shipping research at Refinitiv, said the congestion could take “several days to weeks to clear”.

“We’ve never seen anything like this before,” Raja said. “It is expected to have a ripple effect on the other convoys, schedules and global markets — given the vital importance of the waterway.”

Additional reporting by Kathrin Hille in Taipei

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