Suez Canal Blockage
Introduction
The Suez Canal is a sea-level waterway that connects the Mediterranean and Red Seas, separating the African and Asian continents. It is one of the world’s heaviest used shipping lanes, especially between Europe and Asian-Pacific lands. The 193 km long canal reduces the transit time by a few days for sailors, who would otherwise be sailing around the African continent to get to Asia.
Ever Given
Ever Given is a colossal container ship, one of the largest in the world, owned by Shoei Kisen Kaisha, operated by Taiwanese transport company Evergreen Marine. The ship was on its way to the port of Rotterdam from China with 18300 containers full of goods.
On Tuesday, 23rd of March, the ship ran aground and got lodged sideways in the canal due to a gust of wind - a sandstorm - which blew the ship off its course. However, investigations are to be conducted to find out if the gust of wind was the only reason for the ship to get stuck and if there were technical and human reasons involved in this blockage, which resulted in the loss of roughly $54 billion.
On the 29th of March, the ship was wrenched free by digging, tugging, and pulling. In attempts to dislodge it from the mud and sand, it was stuck in with tugboats pushing and pulling the ship in confluence with a swelling tide.
Impacts of the blockage
The Ever Given container ship was freed on the 29th of March, the impact of blocking the Suez Canal will be significant.
The Suez Canal is an essential marine connection as it provides the shortest link between Asia and Europe. Thus, about 12% of the global trade passes through the canal in order to avoid a long trip that goes around the southern tip of Africa. According to Lloyd’s List, around $9.5 billion worth of trade was held up each day while the 193-km-long canal was blocked. As the economists are examining and analyzing the situation, they have become wary about the impact on inflation and the increase in the cost of consumer goods.
The Suez blockage will create issues to the supply chain which is already under pressure as a result of the global pandemic and a surge in purchasing. Having a shortage in container capacity and low service reliability has caused pressure and vulnerability to the global supply chains. For instance, the Asia-Europe trade route has been utilized at full capacity because of a very high demand from Europeans. However, there are shortages in labor due to COVID-19 restrictions. As a result, there are congested ports, and delays in returning empty containers to Asian exports will further aggravate the current shortage of containers.
According to Lloyd’s list, about 1.9 million barrels of oil go through the canal every day. The blockage could affect shipments of oil and natural gas from the Middle East to Europe. If it had lasted for two weeks, about 1 million tonnes of liquid gas would have been postponed for delivery to Europe, stated Rystad Energy. Although there is a weak demand for energy due to the pandemic, there could have been a significant impact on the global oil market if the blockage lasted longer. Even though the prices of benchmark international crude oil rose, they fell back on Thursday(29th of March).
The blockage demonstrated the importance of the Suez Canal. And fortunately for us, it only lasted for six days, and we will see soon if there is more to come from this disaster.
Written by Aidana Assylbek and Zoyah Virani; edited by Alidar Kuatbekov
