The Suez Canal is a crucial artery in world trade, but its operation suffered a major setback last Tuesday when one of the world’s largest container ships ran aground and blocked transit in both directions. The Ever Given was passing through the Suez Canal en route from the Chinese port of Yantian to Rotterdam, the largest seaport in Europe, when it veered off course in a single lane stretch of the canal, about six kilometres north of the Red Sea entrance.

The ship was occupying fifth position in a northbound convoy of 20 vessels when it was reportedly hit by a strong wind gust and dust storm near the village of Manshiyet, causing it to deviate from the intended route. However, the Suez Canal authority has since suggested that technical or human error may be to blame. When it came to a halt, diagonally blocking the canal, the bow was wedged firmly into one bank, and the stern was resting against the other.

At 399.94 metres, the Ever Given is one of the longest container ships currently in service and is operated by Taiwan based Evergreen Marine Corporation. Its hull has a beam of 58.8 metres, a depth of 32.9 metres and a fully laden draft of 14.5 metres. The vessel’s deadweight is just under 200,000 metric tonne, and it has a container capacity of 20,124 TEU (twenty-foot equivalent units).

A combination of dredging sand and mud from around the ship’s bulbous bow and pulling with as many as 14 tugboats to refloat the stricken carrier had limited success over the weekend.  However, following more dredging and favourable tidal conditions, the Suez Canal Authority announced that salvage crews had been successful in partially freeing the vessel just after 5:30am local time Monday.

The Ever Given was completely refloated at 3:05pm local time Monday, and traffic resumed in both directions shortly thereafter. Egyptian officials said that the backlog of vessels waiting to transit the Suez Canal should be cleared in around three days, but experts believe the knock-on effects on global trade will be felt for weeks, or even months.

More than 425 vessels were stalled at either entrance to the canal, including at least 60 dry bulk vessels carrying commodities such as grain, coal and iron ore. The list also includes container ships, oil tankers, LPG and LNG tankers, livestock carriers, general cargo ships, chemical tankers, and car carriers. The blockage is estimated to be delaying up to US$9.6 billion worth of cargo per day; US$5.1 billion northbound and US$4.5 billion southbound.

The Suez Canal is an artificial sea-level waterway connecting the Mediterranean Sea to The Red Sea via the Isthmus of Suez. It is 193.3 kilometres in length and essentially runs in a north-south direction from Port Said on the Mediterranean Sea to Port Tewfik, near the city of Suez, on the Red Sea. The canal divides the Asian and African continents as well as Egypt controlled Sinai Peninsula to its east from the Egyptian mainland to its west.

The canal took ten years to construct and was officially opened on November 17, 1869. It provides a more direct and faster route between the North Atlantic Ocean and the Indian Ocean, eliminating the need to navigate the long and treacherous alternative around the Cape of Good Hope. It reduces a ship’s journey from the Arabian Gulf to London by around 8,900 kilometres, or roughly ten days sailing time and saves up to 800 tonnes in fuel consumption.

An extension of the Ballah Bypass in 2014, to 35 kilometres in length, increased the canal’s two-way capacity, boosting the number of vessels that can pass through the waterway each day from 49 to 97. However, draft restrictions mean some supertankers still cannot transit fully laden, having to offload part of their cargo onto smaller vessels before entering and then reloading that cargo at the other end.

The Suez Canal saw around 12 per cent of world trade volume navigate its waters in 2020. A record 18,880 vessels traversed the waterway last year carrying a combined cargo of more than one billion tonnes and a combined value of more than US$1 trillion. Approximately 30 per cent of the world’s shipping container trade utilises the canal, with fees paid to the Suez Canal Authority totalling US$5.6bn last year.

Nearly 10 per cent of total seaborne oil trade, 20 per cent of global LNG trade and 16 million TEU passed through the waterway last year. According to the Suez Canal Authority, around 55 million metric tonne of grain is shipped via the channel annually. The vast majority of the grain traffic originates in the US, Europe and the Black Sea regions and enter the canal via the Mediterranean Sea on their way to destinations in the Middle East and the Far East.

In 2019 a total of 54.135 million metric tonnes of cereals transited the canal in dry bulk vessels, of which 53.043 million metric tonne, or 98 per cent, moved in a north to south direction. The total volume of oilseeds was 7.800 million metric tonne, with 5.908 million metric tonne, or 76 per cent, moving from the Atlantic basin to the Indian basin.

Data out of the US last week revealed almost 768,000 metric tonne of US inspected grain cargoes were on their way to Asian customers via the Suez Canal. Around 80 per cent of that was corn, 60 per cent of which was on six vessels destined for China. The other corn destinations were Indonesia, Saudi Arabia and Jordan. The remaining 20 per cent were a cargo each of sorghum, soybeans and wheat destined for China, Bangladesh and Djibouti, respectively.

The suspension of traffic through the narrow waterway has intensified problems for container shipping lines. They were already facing disruption and delays in supplying retail goods to consumers due to the coronavirus pandemic and pricing anomalies that have emerged in the global freight market in recent months.

The impact on energy markets is likely to be mitigated for a short time by subdued demand for crude oil and liquefied natural gas (LNG) as a result of the pandemic and the traditional low season. Additionally, stockpiles that have built up across the globe over the last twelve months will provide a short-term buffer. The Sumed pipeline can also pump 2.5 million barrels of crude oil per day across Egypt from the Red Sea to the Mediterranean Sea.

The uncertainty of passage meant dozens of bulk carriers, oil tankers and container ships have already rerouted via the Cape of Good Hope, adding substantial cost and more than a week to most journey times. Just a week into the crisis and the effects on global trade and sea freight rates have been building. However, freeing the vessel so quickly has avoided an exponential escalation in global shipping costs across almost all categories.

Call your local Grain Brokers Australia representative on 1300 946 544 to discuss your grain marketing needs.

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