More than 400 ships had to either change routes or wait when the container ship Ever Given blocked the Suez Canal for six days last week. The Panamanian ship, one of the largest in the world, was finally freed on Monday afternoon following several unsuccessful attempts to refloat the ship and clear the canal.
Mohamed Abu Basha, macroeconomic analyst at investment bank EFG Hermes, said he did not believe this unprecedented incident would have long-term effects. With rising global oil prices, the Suez Canal remains the fastest and most profitable trade route in the world, he said.
The short-term effects of the incident largely depended on the ability of the waiting ships to queue for a longer period or take an alternate route, Abu Basha said, adding that it was better than the ships. line up rather than change course. go around the Cape of Good Hope because of the expense that would entail.
He said it was difficult to fully assess the losses suffered by the Suez Canal due to the blockage. The channel brings Egypt between $ 12 million and $ 14 million in revenue each year, but the incident is not expected to cost the country dearly, he added.
In recent years, the global shipping industry has relied on giant ships to transfer cargo, prompting Egypt to dig a new branch of the Suez Canal to accommodate heavier and larger ships.
During the six-day blockade, foreign reports said companies such as Ikea and Caterpillar had considered avoiding the Suez Canal and taking the longer Cape of Good Hope route. , which adds more than a week to the trip between Asia and Europe, according to the U.S. financial service Bloomberg.
Robert Koopman, chief economist and director of the Economic Research and Statistics Division of the World Trade Organization (WTO), said companies could exaggerate the long-term damage resulting from the Ever Given saga.
“To overestimate these dangers could be a mistake… The Suez situation is another test that the global economy will have to overcome in the coming weeks, but will eventually succeed,” said The Economic Times.
During the blockade, several ships had started to change course, such as the Ever Greet, the sister ship of Ever Given, also sailing under the Panamanian flag and en route to Rotterdam. The Ever Greet headed for the Cape of Good Hope, much like the Pan Americas, a liquefied natural gas tanker, according to the Marine Traffic website.
The CMA CGM shipping group said on Sunday that it was diverting the course of two of its ships to bypass the Cape. Container shipping company MSC said it had altered the course of 11 ships to resume commercial movement following the blockage of the canal.
According to the New York Times, the Cape of Good Hope tour is longer and more expensive, but many shipping companies opted for it because it was not known when the Suez Canal would be unblocked.
Ten tankers and container ships, some belonging to Cheniere Energy and Shell, have changed course over fears the crisis will drag on for longer, US media CNBC said citing a spokesperson for Marine Traffic.
Egyptian websites reported that a number of exporters said the blockade of the channel could temporarily affect Egyptian exporters and shipping activity. Production materials could arrive later than expected, resulting in blocked production lines, especially since a large portion of those materials originate from China, the exporters said.
Meanwhile, the Moody’s rating agency said the temporary suspension of navigation through the Suez Canal was unlikely to affect Egypt’s balance of payments. He said Suez Canal revenues were 2% of Egypt’s GDP before the coronavirus pandemic, declining to 1.3% after it.
Hani Tawfik, head of the Egyptian Direct Investment Association, said the temporary stoppage of navigation in the Suez Canal had been a major incident, as 20,000 ships pass through the canal each year. The last time navigation was suspended in the Suez Canal was in 1967, Tawfik noted.
The alternatives to the Suez Canal are all financially and commercially more expensive for world trade, and the incident is unlikely to affect the Egyptian economy unless a similar incident recurs, he added.
The Suez Canal Authority was continually expanding the canal to cope with the larger size of ships, Tawfik said, adding that it should deny passage of ships that could cause problems crossing the canal.
* A version of this article appears in print in the April 1, 2021 edition of Al-Ahram Weekly