Efforts to dislodge the massive Ever Given container vessel blocking the Suez Canal will take until at least next Wednesday, raising the prospect of wider impacts from the incident that’s already impacted the flow of oil to grain and cars.
The task of re-floating the 200,000-ton ship, still firmly wedged across the vital maritime trading route, will require about a week of work and potentially longer, said people familiar with the matter, who requested anonymity to discuss private details. Rescue efforts had initially been expected to last only a couple of days.
Work since Tuesday by tugs and diggers — equipment that’s tiny in comparison to the 400-meter long vessel — has so far been unsuccessful in attempting to clear the route, and the queue of waiting oceangoing carriers loaded with billions of dollars worth of oil and consumer goods has risen to almost 240 from 186 on Wednesday, according to Bloomberg data.
If containers can be left aboard the Ever Given, work to re-float should be completed by Thursday, aided by higher tides, according to Randy Giveans, senior vice president of Equity Research for Energy Maritime at Jefferies LLC. Should cargo need to be unloaded or extensive repairs made to the canal itself, “then the downtime could certainly last at least two weeks,” he said.
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. 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.
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 LNG 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.
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.
A list of cargo aboard a HMM Co. vessel waiting outside the canal to return to Asia gives an indication of the sweep of industries caught up in the disruption, with goods on board including wood, machinery, frozen beef, paper, powered milk, furniture, beer, frozen pork, auto components, chocolate, and cosmetics.
Caterpillar Inc., the largest U.S. machinery producer, said it is facing shipment delays and even considering airlifting products if necessary, while Japan’s Envision AESC, a supplier of electric vehicle batteries, said it relies on the Suez Canal for some imports of electrodes.
Mark Ma, owner of Seabay International Freight Forwarding Ltd., a company in Shenzhen that handles Chinese goods including toys, pillows and mattresses sold on platforms such as Amazon.com Inc., said his company has 20 to 30 containers on the ships waiting to cross the blocked canal.
“If it can’t be resumed in a week, it will be horrible,” said Ma. “We will see freight fares spike again. The products are delayed, containers can’t return to China and we can’t deliver more goods.”
Vessels currently outside of the Red Sea planning to use the Suez Canal will need to decide whether to reroute around Africa, adding 10 to 15 days to their voyages, according to Giveans. Ships queuing on either end of the Suez Canal area are likely to wait to determine how long the passage will be closed before taking a decision to divert, he said.
For the container lines that haul about 80% of global merchandise trade, a prolonged bottleneck between Europe and Asia risks throwing off ship schedules set months in advance so importers can plan their purchases, manage inventories and keep store shelves stocked or production lines running.
The problem compounds with every day container ships have to wait. Vessels that arrive several days late can’t be emptied and reloaded in time to make the scheduled return journey. That leads carriers to cancel trips — further constraining capacity and pushing up freight rates.
Rerouting around South Africa’s Cape of Good Hope would add 6,000 miles to the journey and something like $300,000 in fuel costs for a supertanker delivering Middle East oil to Europe. Shipbrokers report that oil traders are increasingly hiring tankers with “just-in-case” options to sail around Africa should the blockage drag on. Vessels traveling empty to collect oil in northwest Europe could get delayed, forcing the region’s exporters to seek alternative carriers, according to people involved in that market.
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Rates to charter oil tankers in some regions have climbed higher since the blockage first appeared. Suezmax vessels, which typically haul 1 million barrels through the canal, are now fetching about $17,000 a day, the most since June 2020. If more ships are forced to sail around the southern tip of Africa, that will boost rates as journey times increase.
(Updates throughout with details)
With assistance from Stephen Stapczynski, Jack Wittels, Shiho Takezawa, Christian Wienberg, Kyunghee Park, Jinshan Hong and Sheela Tobben.