The headline in shipping news of late is that one of the world’s most vital trade arteries has been blocked by a quarter-mile-long container ship, creating a traffic jam that has ensnared over 200 vessels.
The Ever Given ran aground in the Suez Canal on 23 March 2021 due to high winds from a sandstorm. The vessel is one of the world’s largest container ships.
But even before the Ever Given ran aground in the Suez Canal, global supply chains were being stretched to the limits, making it much more expensive to move goods around the world and causing shortages of everything from exercise bikes to cheese at a time of unprecedented demand.
A prolonged closure of the key route between West and East could make matters much worse. Costly delays or diversions to longer routes will heap pressure on businesses that are already facing container shortages, port congestion and capacity constraints.
The grounding of the Ever Given is delaying shipments of consumer goods from Asia to Europe and North America, and agricultural products moving in the opposite direction. Some 237 vessels, including oil tankers and dozens of container ships, were waiting to transit the canal, which handles about 12% of global trade.
The Ever Given turned sideaways in Egypt’s Suez Canal, blocking traffic in a crucial East-West waterway for global shipping.
Progress with stuck vessel
Meanwhile, workers have made “significant progress” and managed to release the Ever Givens ship’s rudder from the sediment. But the port side of the ship’s bow remains stuck in the sand and mud, noting that 11 tugboats were working throughout Saturday alongside dredging operations to clear the sediment.
While progress was being made to dislodge the massive container ship stuck in the Suez Canal, large containerships and fuel tankers had been diverted towards the coast of Africa. This could result in some vessels using local SA ports for refuelling services.
More than 90 vessels pass through the canal on a typical day, and with queues building, some of the world’s largest ships have changed course away from the Suez, and towards the Cape of Good Hope instead.
This includes large oil and gas tankers that have also changed course in the middle of the North Atlantic Ocean before diverting to go around the Cape.
The world’s biggest shipping group, Maersk has rerouted two of its ships, and the second-biggest company Mediterranean Shipping Company (MSC) announced that eleven of its vessels have been rerouted around the coast of South Africa.
Among the ships heading towards South Africa is the “mega ship” Ever Greet, which is operated by the same Taiwan-based company (Evergreen) as the Ever Given.
But there are doubts whether Cape Town harbour, in particular, will be in a position to benefit from increased traffic. It has been beset with delays in processing ships and freight since last year and strong winds have also disrupted traffic to the harbour. Accordingly, a number of large container ships and shipping lines have reportedly bypassed Cape Town in recent months.
The combination of inclement weather over extended periods and availability of equipment has placed pressure on the entire system, resulting in recent backlogs. Currently, seven cranes are in full operation supported by seven gangs (teams).
Higher prices on the way
The cost to move goods by air, ocean, truck and rail is now “structurally up” on 2019.
The extent to which this feeds through to consumer prices will vary from one product to the next. Goods that rely more heavily on imported components will likely cost more. At the same time, if the cost of imported goods rises significantly or these products become less readily available, that could give domestic producers more leeway to increase prices.