Gridlock in the Suez Canal — What this could mean for bulkers
On the morning of Tuesday, 23rd of March 2021 traffic on the Suez Canal* ground to a halt. As the M/V Ever Given, a 20,150 teu container built in 2018, accidentally ran aground after she was hit by a “suspected large gust of wind”. She is now blocking the canal completely with ships unable to pass at all and it could take several days to get her moving again. She is the largest ship to ever go aground in the canal in its 152 year history.
The ship — which at 400 meters is almost as long as the Empire State Building is tall — is wedged across the vital trade passage at the canal’s 94 mile (151 km) mark, the vessel’s operating company said in a statement.
On average around 1,500 vessels transit through the canal each month, around 400 of these are bulk carriers. That’s around 13 transits per day and 4,800 transits per year made by bulk carriers. The canal is used by all bulk carrier vessels up to Capesize, in fact any ship with a maximum draft of 20 meters (66ft) and a maximum capacity of 240,000 dwt can use the canal. The canal will be closed for a minimum of 2 days due to the grounding of the M/V Ever Given.
What could this mean for dry bulk congestion and freight rates?
If the ship is dislodged in only a couple of days (i.e. tomorrow) then trade will go back to normal fairly soon. However if the Suez Canal were to be closed for 5–6 days then the blockage will be meaningful / conducive to pushing rates higher. To reach the congestion peak of early February (around 7%) it would take a closure of over 11–12 days (all else staying equal) as well as eventually add on sailing days with vessels having to take the alternative longer route around the Cape of Good Hope to reach their destinations.
*The Suez Canal is one of the major global trade routes with around 10% of global trade passing through it each year. It has become a vital artery for trade since it was first opened in 1869. The canal is around 120 miles in length (193 km) and has two entrances at Port Said in the north on the Mediterranean side and Port Tawiq in the south in the Gulf of Suez. The canal is owned and operated by the Egyptian government. The International Chamber of Shipping estimates that around $3 Billion of cargo pass through the Suez Canal every day.
C TRANSPORT MARITIME S.A.M. (CTM) is a highly qualified and experienced vessel management company primarily in the dry cargo ocean transportation industry. Established in Monaco in 2004, the company has strong Greek and Italian shipping roots that reach back over a century. CTM currently manages a fleet of over 200 dry cargo vessels at any point in time in the Handymax up to Capesize segments.