Suez Canal crisis and the global trade
Team Veye | 30 Mar 2021
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.
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