In todays blog at AspireFX we are going to be covering a worldwide hot topic; the 220 000 ton mega ship, the Ever Given that’s blocking the Suez Canal.
A sand storm and high winds causing a lack in visibility is said to be the reason behind this enormous vessel getting lodged into the banks of the Suez Canal on Tuesday evening while entering from the Red Sea. The ship is lodged diagonally, blocking traffic flow from both ends. Tugboats and diggers have been working for hours on end to free the mega ship, but are up until this point, still unsuccessful.
This has an enormous effect on the trade between Europe and Asia as well as world trade. This canal is responsible for 12% of all seaborne trade and has now been closed until further notice. This massive ship is said to have 20 000 containers on board carrying anything from clothing to furniture. Specialists have a plan to use helicopters to remove containers off the ship to lighten the load, however, this is an extremely difficult rescue task because by removing the wrong amount of weight from the incorrect side of the could possibly result in the ship breaking in half.
Over 200 container ships are anchored and waiting on a solution. They are all faced with two options, one being to wait and hope that this problem is resolved quickly even though its said that it could take weeks to resolve, or they could take an alternative route around Africa which adds a minimum of 5-6 days onto their trip and for some ships extra costs amounting up to $500 000. Taking the trip around Africa has the risk of pirate attacks added to the extra 30% shipping time making it even more of an unfavourable option. The pause in supply is having a huge negative effect on global trade which was already under immense pressure from the effects of the Covid-19 pandemic.
There are currently 2 Japanese Special Rescue teams that are on the scene planning a way to clear up the traffic and get the huge vessel out of the spot its currently in and back into deeper water where it can move freely.
There are an estimated 13 million barrels of oil stuck on board the Ever Given, this adding immense pressure on supply causing a spike in the already rising oil and gas prices seen due to the previous lag in production caused by the pandemic and supply shock. On Wednesday, one day after the huge vessel was stuck, the price of oil was already up 6%. This black swan event adds fuel to the growing expectation of an oil super cycle.
The news of this canal being blocked drew big buyers into the oil market and alongside other economical factors this lead to Brent Crude’s one-month futures contract gaining its biggest one day gain in near a year. This blockage is effecting the oil market immensely as between 5-10% of all seaborne oil is transported through the Suez Canal, causing a delay of about 3-5 million barrels of oil per day.
With the enormous pressure this puts on global trade and the estimated $9.6 Billion delay on goods that’s occurred daily, there is however still hope for the situation as multiple countries have stepped forward to help free the boat from the banks of the Seuz Canal including Boris Johnson stating that they will have his support. There is also extremely rare high tides coming in this weekend which also leaves hope for the water levels to rise high enough to assist the Diggers and Tugboats in freeing the vessel, but this is not a definite solution it is hopeful.
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