The Suez Canal Obstruction and its economic ramifications
On March 23, the gargantuan 20,000 TEU container ship Ever Given was grounded after the vessel lost control of its original trajectory by strong winds and as a result was stuck between the waterway of Suez Canal. The ship, stretching 400 meters long, which is approximately equivalent to the height of the Empire State Building in New York, was enough to prevent other vessels from passing through and kept around 230 other container ships to wait in line for six days before the waterway was clear. The Suez Canal-- connecting the Mediterranean Sea and the Red Sea-- is a critically important maritime route that tremendously shortens the amount of time it takes to transport between Asia, Africa and Europe. Analysis estimates that around $9.6 billion worth of goods were unable to be transported due to the incident. Maritime experts anxiously prospect that the incident will have greater consequences for the global economy. Former Maritime Mariner and professor at Campbell University Sal Mercogliano made early remarks on the incident as he stated that it would be a “massive disruption in the economy” like that of the early stages of COVID-19 when “goods were not transported in a clear and efficient way.” There were also numerous reports anticipating that European countries may experience a temporary lack in basic commodities like instant coffee which is mostly exported from Asian countries like Vietnam, delineating the gravity of the situation. From digging the embankment of the head of the ship using heavy machinery to devising plans to reduce the weight of the ship by removing containers, the Canal Authority strived to do their best of unshackling the waterway as billions of dollars were lost daily. Some ships have taken the alternative route of going around the southern tip of Africa via the Cape of Good Hope, which added up to two weeks of their journey time. The ship was finally freed on March 29th after several tugs managed to tow the ship out of the waterway.
Although the waterway is now clear, it remains elusive for whom will be responsible for the unfathomably large economic loss that was created over the week of complete obstruction. Shipment corporations are liable for the delay in delivery, and these corporations may claim insurance. Considering that a multitude of ships even left the canal to go around the Cape of Good Hope before the canal reopened, which would add additional travel time, it is prospected that the incident will incite further arguments between shipment corporations and the Suez Canal authority. The Suez Canal authority vehemently proclaimed that the canal had no pre-existing problems to cause such blockade, and thus the Japanese shipbuilding company Imabari Shipbuilding (the manufacturer of the Ever Given) would be responsible for the incident. It is expected that the quarrel over incident will continue indefinitely.
In addition to the ongoing dispute between the shipment companies and the Canal authority, there were numerous economic implications rendered by the unprecedented hindrance in the Suez Canal. One of the most evident changes was in oil prices. The temporarily inflated oil prices-- due to the prolonged delivery of oil shipment-- plummeted as the Suez Canal was unblocked. Moreover, freight forwarders warn that the demand for alternative modes for transportation could increase in the short term as shipping corporations may deem the conventional method of transporting through the Suez Canal as unreliable. Livestock and food transportation, as expected, was profoundly impacted by the circumstance as prolonged delivery time indicated greater fatality rates among animals and higher degree of food adulteration. Gabi Paun of Animals International stated "Every hour counts for the sheep and the fatality rate will only grow … and [for] the ships were carrying 25% more food ... it would nonetheless have been finished by now". As of now, the economic ramifications stimulated by the blockage are likely to only increase rather than subside. We only hope that swift resolutions are made to hastily ameliorate the potentially worsening ripples over the economy.