The global shipping industry came to a halt when the giant cargo vessel “Ever Given” got stuck in the world’s busiest waterway route, Suez Canal. The last time any ship was stuck in the Suez canal was for eight long years way back in 1967 during the Egypt-Israel war. A total of 14 ships from Britain, France, America, Germany, Sweden, Bulgaria, Poland and Czechoslovakia spent eight years stuck in the Great Bitter Lake in the Suez canal.
History repeats itself. Now, after decades of undisrupted operations, a giant cargo ship, the size of the empire state building, was stuck in the Suez canal, causing $400 million worth of loss to the global trade every hour.
How such an accident happened, how was it resolved, and what are the implications of such a blockade to the global trade? Here’s everything you need to know about the latest Suez canal accident.
The History of Suez Canal And Ever Given
For the uninitiated, the Suez canal serves as the main channel for world trade. Ships passing from Asia to Europe and North America utilise the Suez canal to shorten their trips by some 8,900 km, saving millions in fuel and other expenses.
Suez canal is 193.30 km in length, and a total of 18,500 ships used the passage last year, which is equivalent to 51 ships crossing the region every day. The control of the Suez canal belongs to Egypt. And after the eight-year-long war with Israel Suez canal was first opened on 5th June 1975.
The water passage is of great significance to the Egyptian economy, bringing in a hefty foreign currency amount. For instance, in 2012, the Suez canal brought in $433.1 million, which dropped by 6.2% Y-o-Y in 2013 to $403.4 million.
This is why in 2014, the Egyptian government improved the Suez canal to sustain heavy ship traffic. Particularly, the Ballah Bypass, which lies above the Great Bitter lake, was widened by 35 km to decrease the canal’s transit time.
The Suez canal renovation was fruitful as at the start of 2016, revenue from the waterway rose to $3.183 billion. Although the canal’s revenue growth has steadied since the past few years, it still saw a 4.7% growth in the last five years.
The recent history of the Suez canal has been of efficiency. Despite providing a passage to thousands of ships, none of them got stuck in the canal—none except the Ever Given.
The ship itself has some fascinating facts as well. It is owned by Shoei Kisen Kaisha and Luster Maritime. Ever Given is leased by Evergreen Marine Corp, A Taiwanese Marine Corp. This is why the name “Evergreen” is printed on the ship instead of Ever Given. The ship itself is registered in Panama and is manned by Bernhard Schulte Shipmanagement, a German ship management company. The same company was also in the news in 2010 when they successfully thwarted pirates when en route to Lagos from Pointe-Noire.
The involvement of BSM makes the Suez canal blockade more interesting. A management company that can train its crew to thwart off pirates succumbed to navigational challenges in one of the world’s most-visited water passages. Therefore, it makes sense that Ever Given’s owners are seeking to file a lawsuit against the ship management company.
How Did The Accident Happen?
Ever Given was stuck near the Suez canal’s southern entrance in a single-lane section about 985 feet wide.
According to the crew on board, the ship got wedged due to heavy sideways wind, which steered the 1,312-foot 2,20,000 ton ship sideways into the sandy shore. According to the Suez canal officials, the explanation seems less than satisfactory. Chairman of Suez Canal Authority attributes human or technical error to the ship’s blockage and not just bad weather.
Freedom At Last!
After a week-long effort by Egyptian authorities, the ship Ever Given was finally freed. Duggers worked round the clock to dislodge the massive cargo ship from the sand. Meanwhile, tugboats steered it into the water.
The president of Egypt congratulated authorities’ efforts in freeing such a big ship in a week.
“And by restoring matters to their normal course, with Egyptian hands, the whole world can be assured of the path of its goods and needs that are carried through this navigational artery,” wrote Egypt’s President Abdel Fattah al-Sisi on his social media page.
However, experts argue that the blocking of the Suez canal has shown cracks in the world’s supply chain. Hosuk Lee-Makiyama, an International Trade Economist, suggested an alternative pathway for worldwide shipping. “One alternative is the arctic and Northern coast of Siberia that could possibly open up, which is now a possibility because of the global warming.”
Moreover, the responsibility to make the Suez canal less prone to such blockades in the future increasingly falls on the shoulders of Egyptian authorities.
“There’s gonna be a lot of head-scratching and thinking not only about making supply chains more resilient but how to make the canal itself more robust,” said Michael Bell, University of Sydney Business School.
Long Term Implications
Since the day Ever Given got stuck, tankers carrying oil, petrol, coal and other essential items have been waiting at both ends of the canal. A total of 360 ships are already in queue to cross the waterway.
Consequently, oil was trading $0.46 up on 29th March, when the cargo ship was freed. In light of this event, one of the world’s major oil producers could increase its production capacity. According to a Reuters report, Russia is likely to increase oil production while UAE and Saudi Arabia are likely to keep the supply steady for another month.
According to Professor Mangan, recent months have seen a spike in global freight transport due to global rebound from the pandemic. Mangan teaches Marine transport and logistics at England’s Newcastle University and follows global trade closely.
The shipping delay would come at a significantly higher cost than it’d have come under normal circumstances. In an interview with CNBC, Professor Mangan concluded: “The timing of this is absolutely horrendous.”
“The only thing worse, I guess, would be if it had happened maybe at Christmas time.”
Additionally, Insurance and legal claims seeking compensation for delayed payments are already starting to mount up. Experts believe that the effects on Asia and Europe could be higher; meanwhile, North America will see little to no effect.
The incident adds to the supply chokehold the world is already suffering from. Already semi-conductor shortages have led to a global chip crisis, and the six-day delay in global trade is sure to have a long term impact. Which we are about to see any day now.