April 19, 2021

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Suez Canal fallout: What caused the Ever Given’s grounding? Answer will be expensive for some.

3 min read

Ships were once again gliding through the Suez Canal on Tuesday, but the impact of the calamity that halted travel through one of the world’s most vital shipping passages will be felt for weeks, months or even years.

The mammoth cargo ship Ever Given, wedged across a narrow section of the canal for a week, was finally dislodged Monday. More than 400 ships backed up by the incident have been moving again, but catching up could take a week or more, experts say.

That’s just the beginning.

The first priority is normalizing the global shipping industry. Ahmed Bashir, head of Global Execution Centers for global shipping giant Maersk, said his company had 34 ships stalled in the backup. As the company is notified when its ships can pass through, Bashir said his crisis team is working to mitigate the delays as much as possible.

The canal carries more than 10% of world trade, and the worldwide cost of the blockage has been estimated at up to $10 billion a day – about $400 million an hour. Bashir warned the shipping industry will “feel the ripple of this closure for some weeks to come.”

“It will take some time for the effects of this incident to be fully absorbed,” Bashir said in a video message to customers. “Aside from the delays directly caused by the closure, there is an inevitable bunching of vessels that occurs as they call their next ports.”

‘We pulled it off!’: Grounded cargo ship Ever Given freed in Suez Canal

William Lee, chief economist at the Milken Institute, said the incident is about more than finally getting goods to their destinations

“The supply chain shortages that cause assembly lines to shut down – that will have a greater impact,” Lee said.

While Egypt’s Suez Canal Authority works on clearing the shipping backlog, investigators are combing the Ever Given for clues as to what caused the grounding. The Panamanian-flagged vessel weighs 220,000 tons, is nearly a quarter-mile long and carries 20,000 containers. The ship spun around and became stuck in the sand in a windstorm March 23. 

Workers dredged 30,000 cubic meters of sand – enough to fill about a dozen Olympic-size swimming pools. The ship’s stern was freed Sunday, and the bow was removed from the canal bank Monday. A dozen tugboats were finally able to drag the ship back into the middle of the canal.

The ship “came out intact and it has no problems,” the canal authority said.

“This was the result of successful push and tow maneuvers, which led to the restoration of 80% of the vessel’s direction,” the canal authority said in a statement.

Egyptian government officials, insurers and shippers are awaiting reports on what caused the grounding. A determination of fault will likely lead to years of litigation to recoup the costs of repairing the ship, fixing the canal and reimbursing shippers for the disruptions they faced, said Capt. John Konrad, the founder and CEO of the shipping news website gcaptain.com.

The ship is owned by a Japanese firm, operated by a Taiwanese shipper and flagged in Panama.

“This ship is a multinational conglomeration,” Konrad said.

Ever Given refloated and freed: How they got the ship to move once again 

The ship’s owner, Shoei Kisen Kaisha Ltd., said Tuesday that it would aid the investigation but declined to discuss possible causes of the grounding citing the ongoing probe. 

Shoei Kisen Kaisha Ltd. is covered with some $3 billion in liability insurance through 13 Protection & Indemnity Clubs. Those clubs are not-for-profit mutual insurers used by the vast majority of global shipping firms. Global legal firm Clyde and Co. said the Ever Given’s owner likely would pay Egypt’s canal authority for the assistance already rendered to the vessel. The authority also could fine the Ever Given.

“We anticipate a detailed investigation will follow, which will determine the cause,” the firm said. “Evidently the cause will impact upon the legal liabilities of the ship and cargo interests.”

Contributing: The Associated Press

Suez Canal ship freed: Pressure points in supply chain, global trade persist

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