Facebook
Twitter
LinkedIn
Instagram
Youtube

Suez Canal crisis and the global trade

Team Veye | 30 Mar 2021

Suez Canal crisis and the global trade

Suez Canal has been blocked since Tuesday last which inevitably, brought back the memories of 1956 tension, although nothing of that sort is happening right now.

What has happened this time is that a 25-member Panama-flagged ship named Ever Given lost the path due to a strong gust of wind and robust tides and got wedged diagonally. This led to the blocking of the Suez Canal and hampering the supply chain between Asia and Europe. Latest reports suggest that the experts say that though water has been flowing underneath the ship, it is still not clear when the giant vessel can be refloated back and free up the canal.

Opened in the year 1869, Suez Canal has been the most important waterway. Millions of tons of manufactured goods make their way from China and South Asia to Europe via the canal. The man-made waterway eased the global trade by offering a route that circumvented the need to go around Africa and has since been a key route for oil tankers going to and from the Middle East.

The 120-mile long canal between the Red Sea and the Mediterranean separates Africa from the Middle East and Asia and is also the shortest route between Asia and Europe.

The choking of the global trade route will affect the prices of goods, and prolonged blockage would have severe consequences, from affecting oil prices and shipping rates to forcing container vessels to take the much longer route around Africa.

As per the latest reports, more than 320 ships were waiting to travel through the waterway, either to the Mediterranean or the Red Sea. Dozens of others still listed their destination as the canal, although shippers increasingly appear to be avoiding the passage.

According to Bloomberg, the shipowner has taken some responsibility but says charterers need to deal with the cargo owners. There were potentially thousands of insurance policies taken out on the steel boxes stacked high on the massive boat blocking the Suez Canal and upending world trade. They could result in millions of dollars in payouts though the process could become incredibly complex.

Disclaimer

Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing reports. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.