Suez Canal flows could resume soon as container ship partially refloated: sources

The Suez Canal, one of the world's most critical commodity chokepoints, is likely to remain blocked till at least late March 24 as efforts to fully refloat the grounded container ship continue, several shipping sources told S&P Global Platts.

The Ever Given container ship ran aground on March 23 in the southern end of the canal, halting the passage of all ships transiting through the key waterway. This has already led to a long traffic jam on both sides of the canal, delaying shipments of many commodities, pushing freight rates up, and disturbing seaborne trade flows globally.

The Suez Canal connects Red Sea with the Mediterranean, thereby linking Asia with Europe. More than 18,000 ships pass through the canal, according to the Suez Canal Authority.

Photo: Platts cFlow

The Ever Given is still waiting to be towed to clear the blockage after being partially refloated, sources said.

Leth Agencies, a shipping company stationed at the canal, said the refloating of the Ever Given was continuing. "Two dredgers are expected to commence their efforts tonight around 2000 local time (1800 GMT)," it said in a notice.

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Earlier on March 24, shipping and logistics company GAC said the grounded ship had been partially refloated and was now alongside the canal bank.

"Convoys and traffic are expected to resume as soon as vessel is towed to another position," GAC said in its latest port update.

The Ever Given ran aground at about 0740 local time (0640 GMT) on March 23 after it suffered a blackout while transiting in a northerly direction. This caused a halting of all shipments and by March 24 evening, flows on both the northbound and southbound directions were still suspended, sources said.

PRICES, FREIGHT RATES FIRM

Oil prices, which lost nearly $8/b in the week ended March 20, got support March 24 from the blockage. ICE May Brent crude futures was trading at $63.90/b, up $3.13/b from its previous settlement as of 1607 GMT.

Almost 10% of total seaborne oil trade and 8% of global LNG trade passes through the Suez Canal, according to data from the US Energy Information Administration. It is a strategic route for crude oil, petroleum products, LNG shipments and consumer goods.

The incident was already affecting freight rates on a wide range of ships, with an immediate impact seen on oil tankers and containers.

Spot freight rates for a Suezmax shipping crude from the Persian Gulf to the Mediterranean were assessed at Worldscale 23 on March 24, the highest level since Feb. 2, according to Platts data. Freight rates in the Mediterranean and Black Sea were also strengthening, with ships stuck in the long traffic jam tightening tonnage, shipping sources said.

The Platts Container Rate 1 -- North Asia-to-North Continent -- was at $9,500/forty-foot equivalent unit on March 24, up from $1,375/FEU a year earlier, as logistical issues continue to bite.

Several container liners are looking to reroute cargoes via the Cape of Good Hope in an attempt to keep shipments moving, although this will cause additional costs in the market. There are already significant delays at European container ports owing to ongoing firm demand and equipment shortages around the world, which have pushed freight rates to all-time highs.

Logjam

S&P Global Platts Analytics said the incident is unlikely to have any long-term effects on shipping rates. But it added that the backlog of ships could take a minimum of five days to clear, with no impact on short-term freight market fundamentals. Demurrage costs, which are charged by shipowners to the consignee when transit is delayed, will be the most likely mechanism to accommodate the delays in transiting the Suez Canal, Platts Analytics said in a recent note.

There are already close to 80 ships including crude, oil products and chemical tankers, dry bulk carriers and container ships waiting to transit the canal from both sides, according to data from cFlow, Platts trade-flow software. In the Great Bitter Lake section of the canal, which is just north of where the container ship ran aground, there are already 34 ships waiting to pass through.

A few of the oil tankers are carrying crudes such as Saudi Arabia's Arab Light and Arab Extra Light, Iraq's Basrah Light and UAE's Murban, and also refined products like naphtha, jet fuel and gasoil, according to Platts cFlow.

The giant container ship Ever Given has a capacity of 20,000 twenty-foot equivalent units and is sailing under a Panama flag.

The Ever Given loaded from the Chinese port of Yantian on March 8 and was on its way to Rotterdam in the Netherlands before the incident on March 23.

Representatives at Taiwan-based Evergreen Maritime, which owns the ship, were unavailable for comment.