With Suez Canal crisis ended, it's time to add up the damages

With cargoes delayed for weeks if not months, the blockage could unleash a flood of claims by everyone affected. PHOTO: REUTERS

ISMAILIA, EGYPT (BLOOMBERG) - The immediate crisis of the Suez Canal blockage may have ended, but the battle over damages from the waterway's longest closure in almost half a century is just beginning.

The long-term cost of the canal's estimated US$10 billion (S$13.5 billion) a day closure will likely be small, given that global merchandise trade amounts to US$18 trillion a year.

Yet with cargoes delayed for weeks if not months, the blockage could unleash a flood of claims by everyone affected, from the shipping lines to manufacturers and oil producers.

"The legal issues are so enormous," said Ms Alexis Cahalan, a partner at Norton White in Sydney, which specialises in transport law.

"If you can imagine the variety of cargoes that are there - everything from oil, grain, consumer goods like refrigerators to perishable goods - that is where the enormity of the claims may not be known for a time."

The Ever Given was successfully pried from the sand on Monday (March 29), and traffic has resumed through the canal.

But the blockage, which began last Tuesday, was the canal's longest closure since it was shut for eight years following the 1967 Six-Day War and offered a reminder of the fragility of global trade infrastructure and threats to supply lines already stretched by the pandemic.

The Egyptian authorities were desperate to get traffic flowing again through the waterway that's a conduit for about 12 per cent of world trade and around one million barrels of oil a day.

Leth Agencies, one of the top providers of Suez Canal crossing services, said 37 ships exited from Great Bitter Lake by 3.30am local time and 76 are scheduled to go on Tuesday.

South Korea's shipping giant HMM said the HMM Gdansk, one of the world's largest container vessels and which can carry 24,000 20ft boxes, was scheduled to transit through the waterway on Tuesday after being held up since last week.

It may take as long as four days to return the canal to normal, Suez Canal Authority chairman Osama Rabie said at a Monday evening press conference.

That assessment may be optimistic, and it could take weeks for the situation to be fully resolved, according to Mr Arthur Richier, senior freight analyst at energy market intelligence firm Vortexa.

Remote video URL

Freight rates for the affected shipping routes are already rising due to lower availability of tankers as some stay stuck and some are taking the longer route around the Cape of Good Hope.

"Coordinating the logistics of who gets to go through first and how that's going to be sorted out, I think the Egyptians have quite a job on their hands," Mr John Wobensmith, chief executive officer of Genco Shipping and Trading, said on Tuesday in an interview with Bloomberg Television.

To prevent future disruptions and help accommodate higher volumes of shipping traffic, the authorities could consider widening the Suez Canal, he said.

The canal's blockage will reduce global reinsurers' earnings, which have already been hit by winter storms in the US and flooding in Australia, as well as the pandemic, according to Fitch Ratings.

Prices for marine reinsurance will rise further as a consequence, it said. Fitch estimates losses may amount to hundreds of millions of euros.

In a potential merry-go-round of legal action, owners of the goods on board the Ever Given and other ships could seek compensation for delays from their insurers, if they have one.

Those insurers for cargo on board can in turn file claims against Ever Given's owners, who will then look to their insurers for protection.

Taiwan's Evergreen Line, which chartered the Ever Given, says Japan's Shoei Kisen Kaisha - the ship's owner - is responsible for any losses. Shoei Kisen has taken some responsibility, but says charterers need to deal with the cargo owners.

Evergreen is being represented by Ince Gordon Dadds as legal adviser, according to people familiar with the matter, who asked not to be identified because they aren't authorised to speak to the media. London-based Ince Gordon Dadds and Evergreen declined to comment.

Taiwan's Evergreen Line, which chartered the Ever Given, says Japan's Shoei Kisen Kaisha - the ship's owner - is responsible for any losses. PHOTO: AFP/SUEZ CANAL AUTHORITY

An official at Shoei Kisen said the company hasn't received any compensation claim from various parties yet.

The firm doesn't have an estimate on the amount of potential claims and is still examining what it is responsible for.

The ship's hull is insured through three Japanese companies.

Responsibility for the giant ship's grounding will be determined after an investigation, the Suez Canal's Mr Rabie said, adding that the authority isn't at fault and that the ship's captain - and not the pilot - was responsible for the vessel.

Inspections of potential damage are continuing to the Ever Given, which has been moved north to the Great Bitter Lake.

Those checks will determine whether the vessel can resume its scheduled service, and what happens to the cargo onboard, Evergreen said in a statement.

Join ST's Telegram channel and get the latest breaking news delivered to you.