Suez Canal importance: How the blockage can impact world trade

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Also, about 12 per cent of global trade goes through the canal, making its position so integral that the world powers have fought over the waterway since it was completed.

Well, what do we know about the Suez Canal’s importance? It is definitely one of the world’s most integral waterways meant for trade, located 75 miles east of Cairo in Egypt, the canal links the Mediterranean Sea to the Red Sea, allowing for direct shipping from Europe to Asia. Around 12 per cent of the world’s shipping traffic is said to go through the man-made Suez Canal, which stands to be even more vital currently given the pandemic-related obstacles to shipping across the world. And that’s why it is also a big deal that a 1,312-foot-long cargo ship named Ever Given got stuck in the Suez Canal recently, stopping the much-needed cargo ships. With the waterway blocked, and with efforts in vain to move out of the way, the worry is of how the blockage can impact world trade.

 

What has happened at the canal?

Ever Given is a two million-ton cargo ship that spans a quarter-mile, roughly the length of a whopping four football fields. On Tuesday, just before 8 am local time, strong gusts of wind was said to have knocked it off course. En route to Rotterdam from China, it was holding around 20,000 shipping containers of cargo when it became wedged in the canal’s east bank. “The accident is mainly due to the lack of visibility resulting from bad weather conditions as the country passes through a dust storm, with wind speed reaching 40 knots,” Suez Canal Authority head Osama Rabie said in a statement.

What does it mean?

“Ship in front of us ran aground while going through the canal and is now stuck sideways,” Julianne Cona, a social media user wrote on Instagram as she snapped a photo of Ever Given from her own cargo ship, “looks like we might be here for a little bit.”
“It’s one of approximately 100 ships that were stuck in the bottleneck by Wednesday morning,” reported The New York Times.
At least 50 ships pass through the Suez Canal each day, according to official statistics. Shipping companies now face a dilemma after the blockage: wait for the Ever Given to be floated or divert around the Horn of Africa, another sea route that links Europe and Asia. However, the latter option would delay shipments by up to a day less than a fortnight. Such delays could thus cause severe shortages, as the global shipping industry is already beset by a lack of shipping containers and other complications arising from the COVID-19 pandemic. Oil is particularly vulnerable to the Suez Canal blockage, with the waterway being a key route for transporting oil from the Middle East to Asia and Europe. Brent crude oil, the price of which is typically used as an international benchmark, rose 2.85 per cent after news of Ever Given’s plight at the canal broke.
As per reports, local officials hope the issue can be resolved within days, but if the delay is sustained longer it would make oil price spikes the beginning of the world’s trouble. “We’re talking about vaccines, manufacturing goods, food, everything. It’s potential catastrophic delays,” Sal Mercogliano, associate professor at Campbell University, said in a statement to media.
Also, about 12 per cent of global trade goes through the canal, making its position so integral that the world powers have fought over the waterway since it was completed in 1869. For now, all that traffic is backed up with the Ever Given stuck in the southern part of the canal, creating another major setback for global supply chains already strained by the e-commerce boom owing to the Coronavirus pandemic. “The Suez Canal blockage comes at a particularly unhelpful time,” said Greg Knowler, European editor at JOC Group, which is part of IHS Markit Ltd. “Even a two-day delay would further add to the supply chain disruption slowing the delivery of cargo to businesses across the UK and Europe,” he added.
The incident was said to have begun on Tuesday when strong winds blasted through the region and kicked up sands along the banks of the 120-mile-long canal, which connects the Mediterranean in the north with the Red Sea in the south. The waterway is narrow — less than even 675 feet wide (205 meters) in some places — and can be quite difficult to navigate when there’s poor visibility. Maybe that’s what led to the blockade.

What are experts doing to free the Suez Canal?

A maritime historian who spoke to the BBC stated that incidents such as this are rare, but can have a massive impact on world trade when they occur. As per the official report, Ever Given is the largest vessel yet to go aground in the Suez Canal. The Suez Canal Authority (SCA) has been trying to refloat the Ever Given using rescue and tug units, the report said. Diggers have also been making efforts to free the ship from the canal’s bank, where it is lodged. Experts have cited that the effort to remove Ever Given and make the Suez canal fully functional again could take several days.
Since the alternative route that is between Europe and Asia around Africa is seven days slower than the Suez route, a daylong blockage could have a severe impact on world trade. According to a Reuters report, any such delay might also lead to a shortage of container vessels and boxes, as 30 per cent of all container ships in the world pass through the Suez Canal. As per SCA data, in 2020, “nearly 19,000 ships, or an average of 51.5 ships per day, with a net tonnage of 1.17 billion tonnes passed through the canal”.

The Suez Canal’s importance

The 150-year-old man-made canal had been controlled by British and French interests in its initial years but was nationalized in 1956 by Egypt’s then leader Gamal Abdel Nasser. Over the years, the canal has been modified to broaden or deepen it. In 2015, Egypt had further announced plans to expand the Suez Canal, which could reduce waiting times and almost double the number of ships that can use the canal daily by 2023.

 

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