Suez Canal: Dislodging the Giant Ship Said to Need at Least a Week

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  • Bloomberg Quicktake: Now published this video item, entitled “Suez Canal: Dislodging the Giant Ship Said to Need at Least a Week” – below is their description.

    Dislodging the container vessel blocking the Suez Canal will take until at least Wednesday, a longer effort than initially feared that will amplify the disruption to global supply chains for everything from oil to grains to cars.

    The extended halt to traffic through one of the world’s most important waterways is stretching a container-shipping industry that’s already operating at full capacity. It threatens costly delays for European companies that rely on a steady flow of Asian imports and for consumers who’ve grown fond of fast online purchases during the pandemic.

    The task of re-floating the 200,000-ton ship called Ever Given, which is still firmly wedged across the vital maritime trade route, will require about a week of work and potentially longer, said people familiar with the matter, who asked not to be identified. Rescue efforts had initially been expected to last only a couple of days.

    “The delays are likely to increase costs, adding to already widespread inflationary pressure on supply chains,” said Chris Rogers, lead trade analyst for S&P Global Market Intelligence’s Panjiva. “The short-term ripple effects will be an increased potential for stock-outs in consumer goods and the risk that just-in-time manufacturing supply chains that had already been roiled by Brexit and commodity shortages may face further interruptions.”

    Even before the Ever Given ran aground in the Suez Canal on Tuesday, the global trade network was already showing signs of strain due to the year-long economic disruption of the coronavirus pandemic.

    The world’s biggest flow of merchandise — between China and the U.S –- has faced nearly five months of bottlenecks at the ports of Los Angeles and Long Beach. Importers have been waiting several weeks for arriving cargo, with the knock-on effect that exporters are unable to secure empty steel boxes needed to deliver their shipments abroad.

    The fear now is that Suez incident will exacerbate Europe’s logistical challenges, resulting in canceled sailings, container shortages and higher freight rates.

    Work since Tuesday by tugs and diggers — equipment that’s tiny in comparison with the 400 meter (1,300 feet) vessel — has so far been unsuccessful. As the rescue teams toil away, the waiting queue of oceangoing carriers loaded with billions of dollars worth of oil and consumer goods has risen to more than 300 from 186 on Wednesday, according to Bloomberg data.

    Should cargo need to be unloaded from the stranded vessel, or extensive repairs made to the canal itself, “then the downtime could certainly last at least two weeks,” according to Randy Giveans, senior vice president of Equity Research for Energy Maritime at Jefferies LLC. The Ever Given could hold almost $1 billion of goods, according to IHS Markit Ltd.

    Vessels that had been scheduled to traverse the Suez Canal are beginning costly and time-consuming detours around Africa as the shipping sector scrambles to keep deliveries moving. South Korea’s HMM Co. instructed a container ship that departed the U.K. on Monday to divert around the Cape of Good Hope to avoid the gridlock. At least seven liquefied natural gas vessels have had routes adjusted away from the canal, according to Kpler analyst Rebecca Chia, and major shippers including A.P. Moller-Maersk A/S and Hapag-Lloyd AG are also studying detours.

    Shipping costs are also surging — the price to ship a 40-foot container from China to Europe has almost quadrupled from a year ago — adding a new burden to global supply chains already reeling from a pandemic that has sowed havoc with shortages and delays.

    The canal blockage is currently holding up about 2 million barrels a day of oil flows, according to Braemar estimates, and snarling bulk carriers that ship products from wheat to iron ore. Global manufacturers are already preparing for delays to both the shipment of finished goods, and materials that are crucial to their production lines.

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