The Suez Canal is blocked! The rescue may take a few weeks!

The Suez Canal is blocked! The rescue may take a few weeks!

On March 23, the 220,000-ton "Ever Given" got stuck in the embankment of the Suez Canal due to sandstorms. On the 25th, two dredgers arrived at the scene and carried out dredging work, but the plan to rescue the huge ship in the morning failed. The salvage company involved in the rescue said: “This may take a few days to a few weeks. If we want to ship all the equipment we need, it’s not something we can do right away.”

The Suez Canal Authority, which originally claimed to be able to resolve the issue within two days, said that the expectation of the ship’s re-launch has been postponed. The agency also announced that it will temporarily suspend all vessels from the 25th. According to foreign media data, for every additional day of delay, $9.6 billion worth of goods are intercepted. As of 17:00 on the 25th, the number of blocked ships has increased to 238.

Concerns about long-term shutdowns have begun to push up freight rates in the freight market. The news that the Suez Canal may be blocked for a longer period of time has shaken the already tight cargo futures market. The Baltic Panamax futures rose more than 10% in the previous period, and the Capesize futures rose more than 15% from yesterday's low.

In addition, at least 16 tankers full of crude oil and refined fuel were involved in this traffic jam. Since the closure of the canal, the price of WTI crude oil has risen by US$60.02, or 3.9%, from US$57.76 per barrel on the 23rd.

Impact on international trade

The direct impact of the blockage of the Suez Canal will be concentrated on Europe-Asia trade, which will delay the already tight supply chain and affect the supply of oil and refined oil. This route is of great significance to global trade. In terms of tonnage, about 10% of world trade volume and 9% of world seaborne oil (equivalent to 5.5 million barrels of oil per day) pass through the Suez Canal every year.

With the extension of the delay time, the shipping liner may choose to reschedule the ship to change the route of the Cape of Good Hope, but "this will directly increase the transportation time by one third." In addition, the continuing impact of shipping liner companies' changes to routes, coupled with container shortages and port loading and unloading speed restrictions, may be more visible in production and trade data in the next few months.

For Egypt, the owner of the Suez Canal, this is also a loss-making business. According to British media reports, the daily westbound and eastbound traffic on the route is worth 9.6 billion U.S. dollars. For every hour of blockade of the canal, Egypt will lose 400 million U.S. dollars.

According to Egyptian media reports, the Egyptian authorities are considering compensation for ships stuck on the canal waiting to pass, but did not disclose more details. Industry experts estimate that the owner of the "Ever Given" and its insurance company will face huge claims from the Suez Canal Authority and other shipping companies. According to British media, in general, the cost of travelling through the Suez Canal is as high as US$500,000.