A container ship which was stuck in the Suez Canal for almost a week has been partially refloated, raising hopes that hundreds of ships that were stuck in a traffic jam carrying billions worth of global trade can soon be released.
The 220,0000 tonne, 400 metre-long vessel – the Ever Given – should be fully refloated later today after being hauled clear of the west wall of the canal.
“This was the result of successful push and tow manoeuvres which led to the restoration of 80% of the vessel’s direction; with the stern 102 metres away from the bank of the canal now instead of 4 metres prior to the refloating,” says Osama Rabie, chairman and managing director of the Suez Canal.
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While the ship has been partially refloated, the “bow is still partially stuck,” Rabie says, as cited in the Financial Times. But high tide is expected to help refloat it.
The Ever Given, which is operated by Evergreen Marine and registered in Panama, entered the Suez Canal from the Red Sea at around roughly around 8AM on Tuesday last week and became stuck after a gust of wind is thought to have blown it into the bank, jamming it across the canal.
Why is the Suez Canal so important?
The Suez Canal – a man-made waterway linking the Mediterranean Sea to the Indian Ocean through the Red Sea – is the shortest trade link between Europe and Asia.
It’s a very busy waterway. In 2020, almost 19,000 ships (an average of around 52 per day), carrying 1.2 billion tonnes of cargo, passed through the canal, according to the Suez Canal Authority.
The canal was built by the “Compagnie Universelle du Canal Maritime de Suez”, and was opened in 1869. The company was granted a licence to operate the canal for 99 years, after which responsibility would pass to the Egyptian government. It was nationalised in 1956, however, which resulted in military action by Britain and France – and their humiliating defeat.
It is 164km long, has an average depth of 24 metres, and passes through two lakes – Lake Timsah and the Great Bitter Lake. However, it is very narrow in places and a one-way system operates.
What effect could the blockage have?
While markets will welcome the partial refloating of the ship, further delay in fully getting the vessel up and running could still have ramifications for global trade.
The incident could have “an impact on movement of oil and consumer goods,” as the canal is one of the world’s busiest maritime routes, says Jim Reid, strategist at Deutsche Bank.
Oil prices dropped on the news that the ship had been partially refloated. The price of Brent and West Texas Intermediate crude are down less than 1% at $64.37 and $60.67, respectively. Oil prices had initially jumped as much as 6% following the incident last week.
Market watchers initially thought the incident would merely spark a knee-jerk reaction in the oil price and, as Warren Patterson, head of commodity strategies at ING Group puts it, “any disruption would be very temporary”. While that is still probably the case, the boat is still partially stuck.
“For now, the markets are taking one of the worst shipping jams in years in their stride, despite the fact the canal handles 12% of the world’s traded goods each day. Hopes of a rapid solution are keeping market sentiment steady for now,” says Sophie Griffiths, market analyst at OANDA.
But if this goes on much longer “the larger the impact on global trade will be, and the more likely we will start to see the impact on risk appetite,” she warns.
Saloni is a web writer for MoneyWeek focusing on personal finance and global financial markets. Her work has appeared in FTAdviser (part of the Financial Times), Business Insider and City A.M, among other publications. She holds a masters in international journalism from City, University of London.
Follow her on Twitter at @sardana_saloni
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