Maritime trade to slow down after ship blocks Suez Canal

Ismailia, Egypt: Maritime trade will slow down for days after a giant container ship got stuck sideways in the Suez Canal, causing a bottleneck in one of the world's busiest shipping routes.

Here are questions and answers about the incident and its consequences:

Who blocked the Suez canal?

The Taiwan-run MV Ever Given had sailed from Yantian, China, and was heading to Rotterdam, Netherlands, when it became lodged at an angle across the canal on Tuesday.

The Suez Canal Authority said the 400-meter (1,300-foot) long and 59-metre-wide ship was caught in a gale-force sandstorm which affected the captain's visibility.

Tug boats worked Wednesday to free the Ever Given and analysts say it could be moved out of the way in a matter of hours, but traffic could nevertheless be disrupted for a few days.

Dozens of ships were blocked by the Panama-flagged ship, but historic sections of the canal were reopened in an effort to ease the traffic jam.

Ships sailing from the Mediterranean were able to travel south.

But broker Braemar warned that if the tug boats are unable to move the ship, some containers may have to be removed by crane barge to lighten the vessel, and "this can take days maybe weeks".

What's the impact of the Suez canal block?

The mega-ship blocks the shipping artery through which more than 10 percent of global maritime trade passes.

The Suez Canal opened in 1869 and widened since is a crucial shortcut between Asia and Europe that saves ships from having to navigate around the southern tip of Africa.

As a result of the accident, dozens of vessels are forced to wait at Egypt's Great Bitter Lake midway along the canal, in the Mediterranean and in the Red Sea, says canal service provider Leth Agencies.

Old sections of the canal are reopened in an effort to ease congestion -- but this doesn't solve the fundamental problem because there is only one lane on the southern end where the ship is stuck.

The blockage hits world oil markets as traders anticipate delays in deliveries. Crude futures surged six percent on Wednesday.

"We've never seen anything like it before," said Ranjith Raja, Middle East oil and shipping researcher at international financial data firm Refinitiv.

"It is likely that the congestion... will take several days or weeks to sort out as it will have a knock-on effect on other convoys."

Why is the Suez canal important?

The canal was widened and modernized several times to accommodate new ships since it was inaugurated in 1869. It is responsible for 10 percent of global maritime trade.

The waterway drastically shortens travel between Asia and Europe: The Singapore-to-Rotterdam route, for example, is 6,000 kilometers (3,700 miles) and up to two weeks shorter than going around Africa.

It is an "absolutely critical" route because "all traffic arriving from Asia goes through the Suez Canal," said Camille Egloff, a maritime transport specialist at Boston Consulting Group.

"If it doesn't go through the canal it has to go via Cape of Good Hope", at the southern tip of Africa, Egloff said.

The canal was widened again in 2015 to allow supersized cargo ships like the Ever Given to use the route.

A project is underway to double its capacity by 2023 to allow around 100 ships to use the canal per day, compared to 50 today.

Is there a shortage threat?

While traffic has slowed down, there is little risk of shortages in goods.

"There are existing stocks. If you look at oil supply, it is only the one from the Middle East and we have other supply sources," Egloff said.

Braemer said that, if it takes more than a week to free the passage, then ships could take the alternative route around the Cape of Good Hope.

The extra eight or nine days travel "will be problematic for cargo already on the way" but it "can be compensated for in the longer-term by means of ordering cargo earlier than normal," it said.

But there could be an adverse effect on certain sectors. An existing shortage of semiconductors has already disrupted the production of cars that rely on technology.

And the deputy director-general of the Federation of German Industries, Holger Loesch, said the blockage exacerbates an already "tense situation in the international transport of containers".

Egloff said: "There will be domino effects in European ports in the days to come."

Will prices of goods rise?

The effect on prices "is likely to be small and transient, as there are alternative sources and shipping routes for crude and products," said Bjornar Tonhaugen, head of oil market research at Rystad Energy.

"But if the blockage lasts for more than a few days, it could impact prices more and for a longer time," he said.

Ranjith Raja, head of MENA oil & shipping at Refinitiv, said "we've never seen anything like this before".

"It's likely that resulting congestion will take several days to weeks to clear as it is expected to have a ripple effect on the other convoys, schedules, and global markets."

He noted that oil prices soared on Wednesday as the ship remained stuck in the canal.

Diverting ships to the Cape of Good Hope is not likely to change liner pricing significantly as there is strong demand in Asia-Europe trade, according to Braemar.

"We expect freight rates to be maintained at current levels regardless of potential route diversion," it said.

What happens next?

The Suez Canal Authority announces Thursday it is "temporarily suspending navigation" along all of the canals.

Egyptian authorities say they have deployed eight additional vessels to free the stricken ship.

Broker Braemar has earlier warned that if tug boats are unable to move the giant vessel, some of its cargo might have to be removed by crane barge to refloat it.

"This can take days, maybe weeks," it says.

The owners of the vessel, Japanese ship-leasing firm Shoei Kisen Kaisha, said Thursday they are facing "extreme difficulty" refloating it.

Company official Toshiaki Fujiwara tells AFP "we still don't know how long it will take".

"We have not heard of any particular progress. Now they are trying to dig out the dirt under the bow of the vessel. They will resume tug operations when the tide rises."

He says the ship had an insurance policy, but that the firm is unaware of the details or the costs involved at this stage.

"It's just the beginning," Fujiwara says.

A history of the key route

Suez canal has been regularly expanded and modernized and is today capable of accommodating some of the world's largest supertankers.

Here is a look back at key stages in the enlargement of the waterway, which handles roughly 10 percent of international maritime trade.

Beginnings of the Suez Canal

When the sea-level canal was first opened in 1869, it was 164 kilometers (102 miles) long and eight meters (26 feet) deep.

It could accommodate ships of up to 5,000 tons to a depth of 6.7 meters, which constituted the bulk of the world's fleet at the time, according to the Suez Canal Authority.

In 1887, the canal was modernized to allow navigation at night, which doubled its capacity.

Growth in the 1950s

It was not until the 1950s that the waterway was substantially expanded, deepened, and lengthened, following demands from shipping companies.

By the time it was nationalized by Egypt's President Gamal Abdel Nasser in 1956, it was 175 kilometers long and 14 meters deep, and could take tankers with a capacity of 30,000 tons to a depth of 10.7 meters.

21st century

A major expansion in 2015 took the length of the waterway to 193.30 kilometers and its depth to 24 meters.

It meant that the canal could handle supertankers with a capacity of 240,000 tons, some of the biggest in the world, that went up to 20.1 meters deep in the water.

In 2019 around 50 ships used the canal daily, compared with three in 1869.

Traffic is expected to almost double by 2023, with two-way circulation also reducing waiting times, the authority says.

Fastest route

The majority of oil transported by sea passes through the Suez Canal, which is the fastest crossing from the Atlantic Ocean to the Indian Ocean but demands hefty passage tolls.

The journey between ports in the Gulf and London, for example, is roughly halved by going through the Suez -- compared to the alternate route via the southern tip of Africa.

Most of the cargo traveling from the Gulf to Western Europe is oil. In the opposite direction, it is mostly manufactured goods and grain from Europe and North America headed to the Far East and Asia.

'Lifeline' for Egypt

One hundred and fifty years after the Suez Canal opened, the international waterway is hugely significant to the economy of modern-day Egypt, which nationalized it in 1956.

The canal, which links the Mediterranean to the Red Sea, was opened to navigation in 1869 and was expanded in 2015 to accommodate larger ships.

Dug in the 19th century using "rudimentary tools," the canal has today become "a lifeline for Egypt and countries around the world," Admiral Osama Rabie, head of the Suez Canal Authority, told AFP in a rare interview.

"We give credit to Ferdinand de Lesseps for putting forward the idea," he said, referring to the French diplomat who masterminded the waterway dug over a decade between 1859 to 1869.

But he insisted it was thanks to the "genius" of the Egyptian people that the project really came to life.

"It was a miracle by all accounts to excavate a 164-kilometer-long (102-mile) canal in 10 years with rudimentary tools," he said.

"A quarter of Egyptians took part in the excavations, that was about a million citizens out of the population of 4.5 million people at that time."

"Between 100,000 to 120,000 died," Rabie added, highlighting that many succumbed to the disease. Experts however dispute those figures saying the fatalities were poorly documented.

In 2015, Egyptians threw their support behind President Abdel Fattah al-Sisi's project to expand the canal, "purchasing 64 billion Egyptian pounds (3.5 million euros, $3.8 million) of investment certificates within eight days".

Thanks to that project, transit time has now been cut from 22 to 11 hours, and the number of vessels crossing daily has increased from an average of 40-45 to 60-65 giant tankers, he said.

Nowadays, container ships account for more than half of the canal's total traffic, with some of them being among the largest in the world reaching a capacity of up to 23,000 TEU (twenty-foot equivalent unit).

Giant oil tankers carrying more than 200,000 tonnes can now transit through the canal as well.

Authorities have also sought to develop the Sinai Peninsula, which lies on the eastern edge of the canal.

"We have also dug six tunnels under the Suez Canal to facilitate movement crossing to and from the Sinai," Rabie said.

"Before we used to talk about developing the Sinai peninsula without any serious decisions having been taken. Now access is easy for people and investors."

Egypt is also developing a free-zone trade hub spanning 461 square kilometers (178 square miles) known as "the Suez Canal Economic Zone".

"Many projects exist along the banks," said Rabie, citing ship supply zones, pharmaceutical factories, and car assembly plants.

He maintained also that the canal "is perfectly secured" under the command of the Egyptian armed forces.

Ongoing fighting between the Egyptian army against the Islamist insurgents in North Sinai "has not affected" the canal or trade, he stressed.

2019: A stormy 150-year history

In its 150th year of operation, the Suez Canal has been through wars and high-stakes power struggles as it imposed itself as a vital international waterway.

On the anniversary of its lavish opening ceremony on November 17, 1869, here is a look back at key dates in its history.

4,000 years ago

As far back as the 19th century BC, a canal existed between the Red Sea and a section of the Nile River that links to the Mediterranean.

Dugout during the reign of Pharaoh Sesostris III could only be navigated during the wet season and required regular dredging. It was eventually abandoned in the eighth century AD.

From the 16th century, various plans were explored to build a navigable waterway between the Mediterranean and the Red Sea, essentially providing a shortcut between Europe and Asia.

1859: construction starts

In a breakthrough in 1854, French diplomat Ferdinand de Lesseps persuaded the new Egyptian ruler, Said Pasha, to grant him a concession to construct a canal from the Red Sea's Gulf of Suez to the Mediterranean.

De Lesseps founded the Suez Canal Company in 1855 and the work was financed through the sale of shares, half of which were bought by the Egyptian ruler.

Digging began in 1859, at first by laborers using picks and shovels, and later with steam- and coal-powered machinery. It involved about 60,000 workers.

1869: grandiose opening

The canal was opened on November 17, 1869, in a grandiose ceremony at Port Said attended by European dignitaries including Napoleon III's wife, Empress Eugenie de Montijo.

In November 1875 an indebted Said Pasha sold his shares to the British government, with French shareholders retaining the rest.

1888: goes international

Amid tussles for control, major powers signed in 1888 the Constantinople Convention that gave the waterway international status and open to all ships in times of war and peace. Egypt was not a signatory.

The provision was not always respected, including during the two World Wars.

1956: Suez Crisis

On July 26, 1956, Egyptian President Gamal Abdel Nasser took the world by surprise by nationalizing the canal to help finance the construction of the Aswan Dam on the Nile.

It sparked the Suez Crisis in which Britain, France, and Israel -- who feared the vital waterway could be cut off -- colluded to attack Egypt.

Israel invaded the Gaza Strip and Sinai peninsula in October; two days later French and British air raids destroyed part of Egypt's air force.

Nasser retaliated in November by sinking all 40 ships in the canal, which was closed until early 1957.

As the tensions soared, Britain and then France ceded, and fighting abruptly ended after 10 days.

The canal was reopened on March 29, 1957, under Egyptian control.

1967: closed by wars

Egypt closed it again in June 1967 during the Six-Day War when Israeli troops invaded Egypt's Sinai Peninsula and reached the east bank of the canal.

It remained closed during the 1973 Yom Kippur War when Egyptian forces crossed the canal in a bid to retake the Sinai. The Israeli army repelled the attack with a counter-crossing.

The war ended with an UN-backed ceasefire.

1974: returned to Egypt

Talks resulted in a military disengagement deal in January 1974 that saw Israeli forces pull back from the canal, which returned to Egyptian control.

After 15 months of demining work, it reopened to international shipping on June 5, 1975.

2015: expansion

On August 6, 2015, President Abdel Fattah al-Sisi officially opened a new route along the canal after work in which part of the existing waterway was widened and deepened.

The expansion is intended to cut the waiting times and double the number of ships using the canal to around 97 per day by 2023.

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