Rescuers are racing to dislodge a vast container ship stuck in the Suez Canal before tides shift next week, potentially stranding it there for weeks and costing the global economy tens of billions of dollars.
As backhoes and tug boats worked around the Panama-flagged Ever Given’s 400-meter-long hull on Thursday evening, experts began to tot up the economic and environmental ramifications of a protracted obstruction. Meanwhile, vessel tracking data showed that some container ships had already started redirecting around the African Cape, a route that can add two weeks of journey length.
Like much of the Asia to Europe traffic that transits one of the world’s most important shipping lanes, the Taiwan-operated mega tanker had been bound for Rotterdam. But as it traversed through the 205-meter wide channel it lost the ability to steer amid high winds and dust storms, according to a statement by The Suez Canal Authority. Evergreen Marine, the Taiwanese firm that operates the ship, said it “was suspected of being hit by a sudden strong wind, causing the hull to deviate from the waterway”.
A full investigation is yet to be undertaken, but vessel management firm Bernhard Schulte Shipmanagement said initial investigations had ruled out any mechanical or engine failure as a cause of the grounding, the BBC reports. This is not the first time the 200,000-tonne Ever Given has been involved in an accident. In Oct. 2019, it crushed a 25-meter long ferry against a pontoon in Hamburg. The German-language Hamburg Morgenpost at the time listed strong winds as a probable cause and quoted an expert that said attempting to maneuver the vessel in such conditions would be akin to “driving on black ice.”
On Wednesday, Dubai-based shipping logistics firm GAC said on its website that the ship had been partially refloated and was resting “alongside the canal bank”, citing information from the Suez Port Authority. Traffic was “expected to resume as soon as the vessel is towed to another position,” the statement said. But the following morning the Ever Given could be viewed on shipping monitors having barely moved and still skewed starboard across the channel. As of Thursday evening, there were hundreds of ships carrying commodities and consumer goods lined up behind the snarl.
Here’s what to know about the stoppage of the Suez Canal, and what it might portend for global trade:
How long is the ship likely to be stuck?
Most likely days and possibly weeks. Currently, tides in the Suez Canal are getting higher, which means that each day until they peak Monday and Tuesday it should get easier to refloat the Ever Given. But after next Thursday, tides will decrease for several weeks making it harder to refloat the vessel.
Two days of trying to achieve that by tugboat have been unsuccessful. Other options include dredging around the ship and offloading ballast water, fuel, or cargo. The latter entails a complex operation that could take days, if not weeks.
On Thursday morning, container ships were still steering towards the Suez, indicating that the carriers hoped for a timely resolution to the blockage, according to an email seen by TIME from a director of a consultancy to colleagues working with shippers importing and exporting goods via the Suez Canal. But by Thursday evening, some large freight ships had begun to divert their routes towards the Cape of Good Hope, suggesting they were betting against the blockage being cleared any time soon.
How much does each day of delay cost?
The International Chamber of Shipping estimates that $3bn worth of cargo passes through the waterway every day. A Thursday morning headline in industry publication Splash, two days after the ship became lodged, read “$6 Billion and Counting.”
But it’s difficult to put a more precise figure on it because of the vast range of goods transported by sea. On a shipment of waste paper, for example, delays are inconsequential; for high-end electronics timed to arrive for a launch, they’re crippling.
The variability hasn’t stopped academics from trying to come up with a metric. In a 2012 working paper for the National Bureau of Economic Research, economists David Hummels and Georg Schaur estimated that each day of shipping delay incurred a cost of between 0.6% to 2.3% of the value of the goods on board a given ship. As hundreds of ships line up waiting for the Ever Given‘s removal, the costs will spiral quickly.
How will this impact global trade?
It will be felt around the world. The 120-mile-long artificial waterway, which connects the Indian Ocean with the Red Sea by way of the Mediterranean, accounts for 12% of global trade and transits between 5% and 10% of the world’s seaborne oil.
That represents a relatively small proportion of the world’s hydrocarbon traffic; analysts told MarketWatch that about 3 million barrels of oil per day passed through the Suez Canal, but a few days of slowdown would not have a critical impact on the market. Oil prices ticked downwards on Thursday, according to Reuters, after jumping about 6% from a six-week low the day before.
The impact on freight costs is likely to be more pronounced. Almost a third of the world’s seaborne freight passes through the Suez Canal—from food to farming equipment; car parts to carpets. And the cost of delays will eventually be passed on to the consumer.
Even before this week’s incident, freight shipping rates had been at an unprecedented high. The COVID-19 pandemic stranded thousands of mariners at sea, held up port operations, and even led to a slowdown in the production of freight containers. Meanwhile, the balance of trade shifted increasingly to Asia, and global lockdowns prompted people with disposable income to spend more money on imported goods.
The boost in demand, combined with a shortage of freight containers has led freight rates to “through the roof,” says Jan Hoffmann, Chief of Trade and Logistics at the United Nations Conference on Trade and Development (UNCTAD). Last month, he says, spot prices hit three times the average, and twice as much as any other peak. “The short-term impact of this grounding will be further pressure on higher freight rates, as the waiting ships and containers compound the shortage of equipment,” says Hoffmann.
What about the environmental costs?
Maritime transport already contributes to between 2% to 3% of global greenhouse gas emissions, similar to that of Germany, yet it is exempt from the Paris Agreement. Ships circumnavigating the African Cape instead of transiting the Suez Canal—and traveling faster to make up for lost time— entails additional fuel consumption and emissions in the short term.
But an incident like this should also prompt a reappraisal of how the global shipping industry works, says Diane Gilpin, founder of the U.K.-based Smart Green Shipping Alliance. It was in part pressure to cut costs and reduce emissions that led to container ships being built on the unmanageable scale of the Ever Given, she says. But better global logistics co-ordination and practices such as Slow Steaming, which involves operating container ships below their maximum speed, and nearshoring, which involves moving production closer to end consumers, offer more sustainable solutions. Research the alliance conducted with the Tyndall Center for Climate Change at Britain’s Manchester University found that if you slow a fleet down by 17% you can save 25% of emissions from that fleet.
“Having this visual underlining what shipping does gives us an opportunity to ask is that really what we want,” says Gilpin, “do we really want to be shipping this much stuff around the world, and be at the mercy of these really brittle supply chains?”
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