The Suez Canal crisis is pushing shipping companies to look for alternatives

Shipping companies have rerouted ships, refused to take on new customers and predicted long delays – and longer-term port congestion around the world – raising the global trade and economic stakes of the Ever Given grounding in the Suez Canal.

Shipping officials said that even if the ship was withdrawn imminently, a backlog of ships waiting to pass through the canal would linger for days, and hijackings of goods could wreak havoc on port traffic around the world for years. weeks, disrupting the usually carefully orchestrated management of the world’s containers. The canal connects the Mediterranean and the Red Sea and accounts for up to 13% of maritime trade and around 10% of maritime oil shipments.

Allianz,

the German insurance giant, estimated the lockdown could cut global trade by up to $10 billion a week. He estimated that for each week that the channel was immobilized, it could reduce annual trade growth by 0.2 to 0.4 percentage points.

The Suez Canal and the never given

Caroline Becquart, senior vice president of Mediterranean Shipping Co., one of the world’s largest container companies, said the lockdown “is going to cause one of the biggest disruptions to global trade in recent years.” Amid extremely tight capacity that began to build late last year and has extended into this year, the crash means companies should expect “a restriction in capacity and transport equipment”.

AP Moller–Maersk A/S, the world’s largest container ship operator, said on Sunday it had diverted 15 of its ships from the Suez Canal and was turning away new customers for now as it assesses its capacity . “For each day the channel remains blocked, the ripple effects on global capacity and equipment continue to increase,” he told his customers. The delays and backlogs “will continue well beyond the physical withdrawal of the Ever Given”, the 1,300ft container ship which became stuck in the canal banks early last Tuesday. Dredging continues to free the ship, with engineers attempting to refloat the vessel at high tide. Maersk said it could not give customers estimated arrival times for affected vessels.

Hapag-Lloyd from Germany HER

said in a client note that nine of its ships were hit and six more were dispatched around the southern tip of Africa. Three of the hijacked ships were on Asia-Europe routes and three others were sailing between Asia and the east coast of the United States. Other diversions are in preparation.

On Sunday, the freighter Ever Given was still stuck in the Suez Canal.


Photo:

Mohamed Elshahed/Associated Press

China Cosco Shipping said 10 of its ships were stranded by the shutdown. His Cosco Excellence, on a voyage from Southeast Asia to the United States, was sent around the southern tip of Africa.

Sea-Intelligence, a Copenhagen-based data group, said rerouting ships that normally use the Suez Canal around Africa or through the Panama Canal in the long term would effectively reduce global container-carrying capacity by 6%, as ships would spend more time sailing on longer voyages.

“It is obvious that such an amount of capacity absorption will have a global impact and lead to severe capacity shortages,” the group said in a report on Friday. Sea-Intelligence said the disruption would affect all trade lanes as container lines adjust their routes with ships at sea for longer periods.

Retailers, consumer goods companies and manufacturers are beginning to turn to air freight and alternative suppliers as they assess the impact of delays on their supply chains.

Supply chain software provider Blue Yonder said customers affected by the crisis include a UK-based drinks maker with around 170 containers of finished goods stuck in transit between Europe and Asia. The company calculates if “if there is a two week delay, is that stock sufficient in the destination supply chain, where they can prioritize their higher level customers?” said Himanshu Mehrotra, Senior Solutions Advisor for Blue Yonder.

Another customer, who manufactures medical devices, is checking with suppliers to see if other components are available to ship by air instead of goods that may be tied up on ships. “They pre-plan the air freight to a bare minimum,” Mehrotra said. “They really can’t wait. They are scheduling more flights and if things open up they will cancel.

Eric Martin-Neuville, executive vice president of transit at France-based logistics service provider Geodis SA, said rail and air freight capacity is limited, however, limiting options for many shippers.

Authorities say they have partially freed a 1,300ft container ship that has been blocking the Suez Canal for nearly a week, but concerns over global supply disruptions remain. Photo: Planet Labs Inc./Associated Press

“Apart from costs, the main challenge is accessing short-term capacity in a period that was already very constrained,” he said. “The current crisis will generate a new level of scheduling chaos, congestion at ports of arrival in both Europe and Asia and will generate [a] new and significant imbalance in the positioning of containers while immobilizing urgently needed boxes at sea and in port.

The Signal Group, a tanker management company with offices in London and Athens, estimated that a two-week closure of the canal would effectively reduce crude oil and product shipping capacity by 4.4%, while that a four-week shutdown would remove 12.6% of tanker capacity by requiring longer trips around the lockdown region, which will likely drive up freight rates for the oil industry.

Rerouting away from the Suez Canal intensified over the weekend as more shippers lost hope of a quick resolution. The first diversions around the waterway involved container ships and tankers which were still far away, usually sailing in the Atlantic en route to Gibraltar to enter the Mediterranean. But now container ships approaching the Red Sea are also abruptly changing course to head south around Africa.

This will delay their arrivals in Europe for up to two weeks and incur additional costs of up to half a million dollars each. The hijackings also threaten major port congestion in major ports in Europe and Asia, as all of these hijacked ships arrive late.

The Maren Maersk, which was expected at the canal on Wednesday en route from Malaysia to Rotterdam, made a sharp turn south on Sunday morning. It is now heading for the Cape of Good Hope in South Africa, followed by ships from FleetMon broadcasts.

Two other container ships from Asia, including MSC’s Amsterdam, previously headed for the Netherlands and Portugal via Suez but were diverted around Africa on Friday, according to FleetMon tracking.

Yet ships that were near the canal continued to obstruct its entrances as they were already too close to be redirected. Leth Agencies, a canal service provider, reported on Sunday that 327 vessels were waiting to enter the waterway at its two entrances to Suez and Port Said, and more than 40 others waiting inside the canal in a large body of water called the Great Bitter. Lake. A Suez Canal official said once the canal reopens, it will take one to three days to clear the backlog. Ocean liner and tanker operators say they expect five days to clear once the passage is safe to navigate again.

Maersk said on Sunday it and its partners had 27 ships waiting to enter the canal, with two more expected to hit traffic jams later in the day. That’s up from seven last Wednesday.

A cargo ship waits to enter the Suez Canal, which accounts for up to 13% of maritime trade and around 10% of maritime oil shipments.


Photo:

Islam Safwat/Bloomberg News

A blockage of the Suez Canal poses a particular challenge to transporters bringing American and European livestock to Middle Eastern markets, just as the region braces for a spike in demand around religious celebrations around Ramadan.

Oil and gas tankers and container ships can be rerouted around the southern tip of Africa at an additional cost, but with limited additional risk of damage to their cargo. But shippers say livestock carriers have no such option.

Vessels loaded with livestock would struggle to find food en route, and a transfer ashore would require trucks with hard-to-find ventilation, said Valid Diab, chief executive of Turkey’s Observator Shipping Co., which is responsible for supplies and other shipments. services for three of these ships stranded outside the canal.

The captain has a cargo of calves and lambs from Cartagena in Spain bound for Jeddah, Saudi Arabia, and two other ships loaded with Romanian and Spanish cows heading either to the same Saudi port or to Aqaba in Jordan. A fourth ship in his fleet will soon arrive in the channel from Venezuela en route to Iraq, he said.

Write to Benoit Faucon at [email protected], Costas Paris at [email protected] and Jennifer Smith at [email protected]

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