THE CLOSURE OF THE SUEZ CANAL BY THE STUCK SHIP THREATENS TO WEIGH DOWN GLOBAL TRADE FOR WEEKS
The Suez Canal Authority announced on Thursday the suspension of navigation through the strategic sea route that connects the Red Sea with the Mediterranean until the container ship Ever Given, which has been stranded since Tuesday at its southern end, is able to refloat. In the absence of progress in the operation to tow the ship, Evergreen shipping company and one of the largest in the world, the sector is preparing for a prolonged closure, which could last weeks. This lockdown threatens to weigh down global trade supply chains. Two of the largest container shipping companies in the world, the Danish Moller-Maersk and the German Hapag-Lloyd, are studying diverting their ships through the African route to avoid the bottleneck.
The world’s supply chains had already been hit hard by the coronavirus crisis. Now, the blockage in the Suez Canal, one of the main arteries of world shipping, is a new blow to global trade. The announcement of the suspension came shortly after the operation resumed to unload the mega-ship, which at 400 meters in length keeps traffic blocked in both directions after an accident caused by bad weather and lack of visibility. So far, all attempts to get the Ever Given back to sailing have failed.
Daily maritime traffic through the Suez Canal is worth about $ 9.6 billion (€ 8.15 billion), according to a first estimate by Lloyd’s List Intelligence. According to this company specialized in information on maritime trade, traffic to the west has a value of 5.1 billion dollars a day, while traffic in the opposite direction moves around 4.5 billion dollars. The company also estimates that containerized goods represent around 26% of the traffic through the canal, so it already anticipates that the delays will have a “significant” value.
As giants like Moller-Maersk are starting to make, the rest of the shipping companies will have to decide whether they trust that the Ever Given will be quickly run aground or else deviate and take the alternative route around the Cape of Good Hope, notes Lars Jensen, director executive of a consulting firm in the container transport sector. According to Jensen, this last possibility takes about a week longer than the Suez route. The longer the canal remains closed, the greater the queue of ships waiting to cross it, creating additional delays even when traffic resumes. A deviation from the route would also have financial implications for Egypt, as infrastructure represents one of its main sources of foreign currency.