Cape of Good Hope Beckons; Refloat Efforts Resume: Suez Update

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By Jack Wittels and Stephen Stapczynski
Mar 25, 2021, 8:10 PM – Updated on Mar 26, 2021, 10:47 AM
Word Count: 2282
The blockage of the Suez Canal is wreaking havoc on global seaborne trade, sending shipping rates surging and making the long journey around Africa the only short-term alternative for many cargoes and commodities.

Work to dislodge the Ever Given resumed this morning, Inchcape Shipping Services said. Freeing up the vessel will take until at least Wednesday next week, according to people familiar with the rescue efforts. Mark Ma, owner of China-based Seabay International Freight Forwarding Ltd., which has 20 to 30 containers waiting to cross the blocked canal, said that if traffic doesn’t resume in a week, “it will be horrible.”

Efforts to Dislodge Suez Canal Ship Said to Need at Least a Week

The blockage is creating another setback for global supply chains already strained by the e-commerce boom linked to the pandemic. About 12% of global trade transits the canal that’s so strategic world powers have fought over it.

Key Highlights:
Work to free the stuck Ever Given will take until at least middle of next week
Operations to refloat the vessel using tugs and dredgers resumed this morning
Almost 240 vessels have queued up, rising from 186 Wednesday, according to Bloomberg data
Why the Suez Canal is so important: QuickTake
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Refloat Efforts Resume, Inchcape Says (6:00 a.m. London)
Operations to refloat the Ever Given using tugs and dredgers resumed at 7am local time, according to Inchcape, a maritime services provider.

At Least 12 U.S. Grain Shipments Impacted (2:48 p.m. HK)
The congestion in the Suez Canal may delay nearly 7% of seaborne U.S. major grain shipments, according to USDA and vessel data analyzed by Bloomberg.

Since the Bellatrix left Zen-Noh’s grain export elevator on the Mississippi River in late February, just 12 of 184 bulk carriers and general cargo ships have opted to take the Suez route, as many vessels take the Panama Canal and the route around South Africa to access Asia.

More than 80% of the impacted grain shipments are corn, with close to 60% of them on six vessels headed to China. At least one ship, the Ledra, hauling corn to Vietnam, recently diverted toward the route around South Africa.

HMM-Chartered Ship Diverts Around Africa (2:47 p.m. HK)
The Hyundai Prestige container ship is detouring around the Cape of Good Hope to avoid gridlock in the Suez Canal, the vessel’s South Korean charterer HMM Co. said.

The ship departed from Southampton, U.K., on Monday and has been told to go around Africa, a spokesman for HMM said. The vessel isn’t part of a scheduled service after its temporary deployment in January to help South Korea exporters, and is scheduled to reach Thailand’s Laem Chabang by late April.

Cheap LNG Shipping Rates Ease Detour Pain (12:37 p.m. HK)
Liquefied natural gas suppliers are beginning to send shipments around Africa, a journey that takes more time but — given current charter rates — isn’t that costly. Unlike oil tanker rates, prices for shipping LNG have remained subdued amid the crisis in Suez. A shift to milder temperatures in Europe and Asia has reduced gas demand, also curbing needs for tankers that ferry the fuel.

At least seven LNG vessels have diverted away from their intended paths through the Suez Canal due to its continued blockage, according to Kpler analyst Rebecca Chia. At least two shipments from the U.S. headed to Asia have changed course in the Atlantic toward South Africa, according to Bloomberg ship-tracking data.

Seabay Owner Says Week’s Delay Will Be ‘Horrible’ (12:23 p.m. HK)
Mark Ma, owner of Seabay International Freight Forwarding Ltd., a company in Shenzhen that handles Chinese goods sold on platforms such as Inc., said his company has 20 to 30 containers on the ships waiting to cross the blocked canal.

“If it can’t be resumed in a week, it will be horrible,” said Ma. “We will see freight fares spike again. The products are delayed, containers can’t return to China and we can’t deliver more goods.”

Detouring ships doesn’t seem like a viable option at the moment, due to risks of taking unfamiliar routes, limited supply to the crew and an extended shipment time. “What if the canal got cleared in 8-10 days? You lose even more time,” said Ma.

Crisis Isn’t Deterring Orders for Mega Ships (12:08 p.m. HK)
The container ship blocking the Suez Canal has done little to deter shipping companies from ordering similarly mega-sized vessels. Korea Shipbuilding & Offshore Engineering Co.and Samsung Heavy Industries Co. — two of the world’s three biggest shipbuilders — announced they’d won orders worth a combined 3.45 trillion won ($3 billion) on Friday to build 25 container vessels that are all longer than the Eiffel Tower.

Orders for mega-big ships have been increasing since this year after the lines saw their profits jump in 2020.

Views of Samsung Heavy Shipyard As Shipbuilder Reviews KDB Proposal For Daewoo Stake Sale Plan
Ships sit under construction at the Samsung Heavy Industries Co. shipyard in this aerial photograph taken in Geoje, South Korea, on Friday, Feb. 1, 2019. Korea Development Bank (KDB) has contacted Samsung Heavy on whether it would be interested in Daewoo Shipbuilding & Marine Engineering Co. before the bank makes a definitive decision on its stake. Samsung Heavy will review KDB’s proposal for Daewoo, the company said in a text message.
Blockage May Disrupt Supplies to Singapore (9:29 a.m. HK)
Singapore may need to draw down existing inventories should the blockage in the Suez Canal temporarily disrupt supplies to the city-state, according to the country’s trade minister.

If tugs and diggers aren’t able to dislodge the container ship blocking traffic soon, ships will have to divert around Africa, adding weeks to journeys, Transport Minister Ong Ye Kung said in a Facebook post. He also said that the Malacca and Singapore straits could be affected, as the incident “illustrates how the world is now so closely interwoven together.”

Backlog of Vessels Will Take Days to Clear (9:19 a.m. HK)
Even if the Ever Given sails away immediately, there’s a backlog of about 200 vessels of all types that will take days to clear, leading to an ever-increasing pile-up, according to Arthur Richier, a senior freight analyst at Vortexa. That’s assuming an average transit of 50 vessels a day via the canal.

Egyptian authorities appear to want to wait until Monday for a higher tide to try and tow the vessel away, indicating that the most realistic return to normal for vessel traffic will only happen in a minimum of 10 days, Richier said.

Ships in Red Sea Seen Leaving if Crisis Lasts 2 Weeks (9:12 a.m. HK)
Ships in the Red Sea will be rerouted only if there is an extended delay in unblocking the Suez Canal, according to Randy Giveans, senior vice president of equity research for energy maritime at Jefferies LLC.

So far, only ships outside the Red Sea that were hoping to use the canal are rerouting around the Cape of Good Hope. For vessels already in the area, it would only make a difference if the canal outage was certain to be over two weeks, since that’s how much additional time they would need to get around the Cape.

Heavy-Lift Helicopters May Be Needed to Unload Containers (8:50 a.m. HK)
The failed attempts to move the Ever Given are increasing the odds that heavy-lift helicopters may be needed to unburden it of at least part of its load of 500 containers, according to Nick Sloane, the salvage master responsible for re-floating the Costa Concordia, which capsized off Italy in 2012.

The so-called sky-crane helicopters, able to lift a load of 25,000 pounds, and Russian MI-26 helicopters would be the only ones able to perform the task. The challenge is to find these helicopters and transport them to the site.

There aren’t many of those that are privately owned, said Keith Sailor, director of commercial operations at Aurora, Oregon-based Columbia Helicopters Inc., a company that operates a fleet of heavy-lift helicopters. “If you can’t find one in the region, you’d need to fly one over there in an Antonov cargo plane,” he said. That could take five to eight days.

Suez Canal Shipping as Elite Team Tackles Stuck Ship
Commercial cargo and container ships ride anchor while waiting to transit the Suez Canal in Ismailia, Egypt, on Thursday, March 25, 2021. The canal, one of the world’s busiest trade lanes, was blocked for a third day by a massive container ship wedged across the width of the passageway.
Ever Given Charterer Says Blackout Didn’t Cause Grounding (8:30 a.m. HK)
There wasn’t a blackout that resulted in a loss of power prior to the Ever Given’s grounding, the ship’s charterer, Taiwan’s Evergreen Line, said in a statement. Evergreen added that responsibility for any expenses incurred during the recovery operation, third-party liability or the cost of any repairs is the owner’s.

The shipowner, Japan’s Shoei Kisen Kaisha, said Thursday it’s responsible for any damage to the ship and canal as a result of the accident, and that charterers are responsible for dealing with cargo owners.

Freight Broker C.H. Robinson Suffering No Impact So Far (8:15 a.m. HK)
C.H. Robinson Worldwide Inc., one of the biggest U.S. freight brokers, hasn’t yet seen a direct impact of the Suez Canal blockage on its operations as it has helped many of its customers move to air freight in the past months.

“Currently, the demand for ocean to air conversion has skyrocketed as we near quarter end,” Matt Castle, vice president of global forwarding, said in response to questions. “It’s too early to tell if additional conversions will be needed due to the Suez canal disruption.”

Traffic Snarl Is Making Shipping Costs Skyrocket (9:10 p.m. London)
It’s going to be tough to come up with a single figure for how much the epic traffic jam in the canal is costing, but shipping rates are already skyrocketing.

The cost to ship a 40-foot container from China to Europe has climbed to about $8,000, almost quadruple the figure a year ago. Suezmax vessels, which typically carry 1 million barrels of oil, are now getting about $17,000 a day, the most since June 2020.

Your Instant Coffee May Soon Be at Risk From Suez Blockage (9:07 p.m. London)
The crisis in the Suez Canal is also curbing shipments of robusta coffee — the type used to make Nescafe. All of the beans from East Africa and Asia — which houses two of the world’s top robusta producers — flow to Europe via the Suez.

Coffee roasters on the continent had already been struggling to get robusta coffee from Vietnam, the world’s largest producer, due to a shortage of shipping containers that has upended the global food trade. Just when the availability of boxes started improving, the canal blockage brought another headache.

Caterpillar Facing Shipment Delays Due to Blockage (8:35 p.m. London)
Caterpillar Inc., the U.S.’s largest machinery producer and one of the biggest in the world, is facing shipment delays due to the Suez Canal blockage and is even considering airlifting products if necessary.

The producer of iconic yellow diggers and bulldozers is anticipating a lag of a week or more in shipments from Asia to its facilities in Europe, according to a person familiar with the matter. The company is already contending with delivery delays of up to three weeks as countries around the world reopen, driving extraordinary demand for its products, according to the person.

Suction Dredger Deployed in Effort to Refloat Ship (8:14 p.m. London)
A specialized suction dredger is the new tool being used in the efforts to dislodge the Ever Given, which has been stuck in the Suez Canal since Wednesday, according to a statement from the ship’s manager, Bernhard Schulte Shipmanagement.

The suction dredger can dislodge 2,000 cubic meters of material per hour and was ready to begin work. A team of expert salvors from SMIT Salvage were at the vessel. The focus is dredging to remove sand and mud around the port side of vessels’ bow.

Canal Traffic Jam Has Doubled to 238 Ships (5:37 p.m. London)
The number of ships waiting to enter the Suez Canal is growing as the waterway remains blocked.

Data compiled by Bloomberg shows there were 238 vessels queued up Thursday, compared with 186 counted on Wednesday and around 100 at the start of the blockage.

The Queue of Ships at The Suez Canal Is Growing
Container Ship Diverting to Avoid Canal (5:23 p.m. London)
A container ship is being diverted around South Africa’s Cape of Good Hope to avoid the blocked Suez Canal, according to Rajesh Unni, a captain and chief executive officer of Synergy Marine.

Eight of more than 375 ships managed by Synergy Marine are caught up in the Suez Canal traffic jam. That includes a 20,000 TEU Ultra Large Container Vessel, or ULCV, three other large container ships, one Very Large Gas carrier, one chemical tanker and two bulk carriers.

“The longer the Canal is closed, the larger the queue of vessels that will be caught up in jams and the bigger the losses for shipping and, ultimately, consumers of the goods which we transport,” Unni siad.

Not Much Room to Maneuver (3:39 p.m. London)
It’s no wonder the stuck Ever Given in the Suez Canal is creating such a headache.

The key trade route is narrow — less than 675 feet wide (205 meters) in some places — and can be difficult to navigate. Work to re-float the giant container ship — about a quarter mile long (400 meters) — and allow passage for oceangoing carriers hauling almost $10 billion of everything from commodities to consumer goods continued without success on Thursday in Egypt.

The blockage highlights a major risk faced by the shipping industry as more and more vessels, which are getting bigger and bigger, transit maritime choke points including the Suez, Panama Canal and the Strait of Hormuz.

Tight Fit
–With assistance from Salma El Wardany, Alex Longley, Julian Lee, Anthony Di Paola, Javier Blas, Robert Tuttle, Aaron Clark, Mirette Magdy, Fred Pals, Yvonne Yue Li, Elaine He, Joe Deaux, Sergio Chapa, Sheela Tobben, Thomas Black, Cindy Wang, Sharon Cho, Dan Murtaugh, Carlos Caminada, Lucia Kassai, Will Wade, Jack Wittels, Kyunghee Park, Jinshan Hong, Kevin Varley and Ann Koh.

© 2021 Bloomberg L.P.


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