On March 23rd the massive shipping vessel known as Ever Given became wedged in the banks of the Suez Canal blocking passage for six days. An estimated 422 ships were stuck waiting at the entrance of the canal for the Ever Given to be dislodged. In the aftermath, may questions still remain. How did this happen? Could this happen again, and what was the impact? This article explores the answers to these questions.
Brief History of the Suez Canal
The Suez Canal is more than 150 years old and connects the Mediterranean Sea to the Red Sea through the Isthmus of Suez. It is 120 miles in length and is connected with several lakes. With the canal accounting for 30 percent of global container shipping traffic, and 12 percent of all global trade, a shut down for any length of time can be costly.
According to the Suez Canal Authority, the most recent shut down marks the sixth time in history that the waterway closed unexpectedly. Of the previous five closures three of them were due to a ship becoming lodged in the banks of the canal. Although a ship blocking the canal isn’t a new issue this was the longest amount of time the waterway closed due to a ship.
An investigation is underway to determine why the Ever Given veered off course. The first theory is that strong winds caused the ship to shift directions and get lodged into the banks of the canal. However, Chairman of the Suez Canal Authority Osama Rabie, does not believe wind was the main cause of the incident. Rabie believes human error played a larger role stating, “The Suez Canal has never been closed because of bad weather.”
However, this is not entirely true. In 2006 the Okal King Dor became stuck in the canal due to sandstorms and high winds causing the ship to drift at an angle into the banks. The Okal King Dor dislodged after 8 hours and at the time the Suez Canal only accounted for 8 percent of global trade.
Impact and Estimated Costs
The Ever Given was fully dislodged on March 29th and was then moved to Great Bitter Lake (a lake part of the Suez Canal) for repairs and inspections. The ship will remain docked in the lake until the cost of damages are resolved. It’s estimated that the blockage had a cost of $9.6 billion daily in global trade. Insurers are expected to absorb the majority of the cost, but it’s not yet determined exactly how much.
The Ever Given’s owner filed a limitation of liability claim against the ship’s operating company Evergreen to limit potential damage claims by the companies affected. Egypt is claiming they are owed $1 billion due to lost revenue from the blockage. Canal authorities are now being hard-pressed to upgrade the canal’s infrastructure to prevent future disruptions. With the Suez Canal being one of the most vital channels for global shipping, it’s critical to avoid shutdowns like this one.
Although this isn’t the first time a ship has blocked passage through the canal this has turned into one of the costliest events. Despite the path clearing in less than a week, many companies continue to face millions of dollars in lost shipping time in an already stressed economy from COVID-19. It may take months for bottlenecks around the world to clear and the global economy to get back on track.