Shipping rates surge with Suez Canal set to be blocked for weeks by stranded ship

A boat equipped with a rope (foreground) attempts to free the stuck container ship Ever Given. PHOTO: NYTIMES/SUEZ CANAL AUTHORITY

ISMAILIA, Egypt (BLOOMBERG, REUTERS) - Shipping rates are surging as the blockage of the Suez Canal is wreaking havoc in the global seaborne trade and making the long trip around Africa the only short-term alternative.

A huge container ship blocking the Suez Canal like a "beached whale" may take weeks to free, the salvage company said, as officials stopped all ships entering the channel on Thursday (March 25) in a new setback for global trade.

Work to dislodge the massive Ever Given container vessel blocking the Suez Canal will take until at least Wednesday next week, according to people familiar with the rescue efforts.

The task of re-floating the 200,000-ton ship will require more time to dredge sand, said the people, who asked not to be named discussing private details. Initially, the salvage mission had been expected to last only a couple of days.

Dredgers will need to move between 15,000 to 20,000 cubic metres of sand in order to reach a depth of 12 to 16 metres - eight times the size of an Olympic swimming pool - to allow the ship to float, the Suez Canal Authority said on Thursday.

"In addition to the dredgers already on site a specialised suction dredger is now with the vessel and will shortly begin work. This dredger can shift 2,000 cubic meters of material every hour," Bernhard Schulte Shipmanagement, the technical manager of the Ever Given said in a statement.

The 400-m Ever Given, almost as long as the Empire State Building is high, is blocking transit in both directions through one of the world's busiest shipping channels for oil and refined fuels, grain and other trade linking Asia and Europe.

Late on Thursday, dredgers were still working to remove thousands of tonnes of sand from around the ship's bow.

Meanwhile a super suction dredger is the new tool being used in the efforts to dislodge the giant container ship that went aground in the key waterway on Tuesday.

The blocking of the waterway is creating another setback for global supply chains already strained by the e-commerce boom linked to the pandemic. About 12 per cent of global trade goes through the canal that's so strategic world powers have fought over it.

On Thursday, 238 vessels were queued up, up from 186 Wednesday, according to Bloomberg data. Ever Given has not moved and operations to re-float were still ongoing earlier in the afternoon, according to Inchcape Shipping Services.

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It's going to be tough to come up with a single figure for how much the epic traffic jam in the canal is costing, but shipping rates are already skyrocketing.

The cost to ship a 40-foot container from China to Europe has climbed to about US$8,000 (S$10,870), almost quadruple the figure a year ago. Suezmax vessels, which typically carry 1 million barrels of oil, are now getting about US$17,000 a day, the most since June 2020.

The crisis in the Suez Canal is also curbing shipments of robusta coffee - the type used to make Nescafe. All of the beans from East Africa and Asia - which houses two of the world's top robusta producers - flow to Europe via the Suez.

Coffee roasters on the continent had already been struggling to get robusta coffee from Vietnam, the world's largest producer, due to a shortage of shipping containers that has upended the global food trade. Just when the availability of boxes started improving, the canal blockage brought another headache.

Two liquefied natural gas tankers loaded in the US and bound for Asian markets appear to have changed course in the mid-Atlantic and are now heading around Africa to avoid gridlock in the Suez waterway.

A.P. Moller-Maersk A/S and Hapag-Lloyd AG are considering sending ships along the same route, moves that would follow a Synergy Marine-managed ship that is being sent around the Cape of Good Hope. Torm A/S, a Danish owner of tankers, said its customers have asked about the cost of options to divert.

Eight of more than 375 ships managed by Synergy Marine are caught up in the Suez Canal traffic jam. That includes a 20,000 TEU Ultra Large Container Vessel, or ULCV, three other large container ships, one Very Large Gas carrier, one chemical tanker and two bulk carriers.

"The longer the Canal is closed, the larger the queue of vessels that will be caught up in jams and the bigger the losses for shipping and, ultimately, consumers of the goods which we transport," Unni siad.

Several dozen vessels have backed up at either end of the canal to create one of the worst shipping jams seen for years. PHOTO: AFP

Russia natural gas supplies via pipeline could provide Europe with some flexibility as LNG imports from the Middle East are affected by the blockage at the Suez Canal, consulting firm Rystad said in a note.

The US could also benefit as shipments from its LNG export terminals could reach Europe much quicker than vessel going around Africa from the Middle East.

"It could be a perfect opportunity for US producers to secure some orders at a time of such a transport route crisis," Rystad said.

The blockage highlights a major risk faced by the shipping industry as more and more vessels, which are getting bigger and bigger, transit maritime choke points including the Suez, Panama Canal and the Strait of Hormuz.

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