Giant vessel disrupts the world’s key trade route, Suez Canal

Attempts are being made to dislodge ,Ever Given, a 400-meter, giant container vessel that ran aground in Egypt’s Suez Canal on Tuesday due to strong winds and sandstorms.

The Suez Canal, which is one of the key trade routes in the world with a daily capacity of about 50 to 85 vessels, has been blocked. About 12% of global trade passes through the 193 km canal, which connects the Mediterranean Sea to the Red Sea and provides the shortest sea link between Asia and Europe.

Dozens of ships, including cargo vessels and oil tankers, are waiting either side of the canal, while several others have been rerouted, according to Refinitive shipping data. More than 300 ships were stuck on either side of the blockage, with some having had to reroute around Africa. According to various reports, the crew members of the 224,000-tonne Ever Given are Indian. The crew members onboard the ship are safe and sound.

Osama Rabie, chairman of the Suez Canal Authority (SCA), told a news conference that 9,000 tonnes of ballast water, which is stored in tanks to stabilize the ship, had been removed to help lighten the vessel.  He said the stern had begun to move on Friday night, and the rudder and propeller had started working again. Rabie highlighted that strong tides and winds had made freeing the ship more difficult. However, he said weather conditions were “not the main reasons” for the giant ship’s grounding. “There may have been technical or human errors. All of these factors will become apparent in the investigation.”

The blockage has led to a jump in oil prices, amid speculation that dislodging the ship could take weeks. A study by Allianz, German insurer, suggested that the blockade could cost global trade $6 to $10 billion a week. It said the cost of shipping oil products, for example, has already doubled and delays to the global manufacturing supply chain could hit consumers.

Paola Rodriguez-Masiu, vice-president of oil markets at Rystad Energy, told CNBC that traders, in a change of heart, decided that Suez Canal blockade is actually becoming more significant for oil flows and supply deliveries than they previously concluded.

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Furthermore, shipping rates for oil product tankers nearly doubled after the ship became stranded, and the blockage has disrupted global supply chains, threatening costly delays for companies already dealing with COVID-19 pandemic restrictions.