Stranded Suez ship raises sobering questions about economic security of oceanic freight
A prolonged blockage of the Suez Canal threatened to choke the world economy, with significant impacts on Africa.
First published by ISS Today
The Suez Canal is one of the world’s major shipping routes, or at least it was until the Ever Given ran aground on 23 March. The blustery conditions that caused it to veer off course and bury its bulbous bow into the banks of the canal have whipped up a global storm of consternation and bemusement. Almost a week later it was reportedly dislodged from the banks of the Suez Canal and refloated. The costs of the delay are not yet known but should run into the tens of billions of US Dollars.
Images of the vessel lodged sideways across one of the world’s most important waterways were shared globally, and it appeared too great a challenge for the Suez Canal Authority to resolve quickly.
The Ever Given’s grounding showed why well-functioning shipping and ports are central to economic function, as well as growth and development aspirations. Yet these are vulnerable to seemingly minor disruptions that can result in higher freight rates, oil prices and surcharges, creating global economic ripples that can hit fragile African economies especially hard.
So much of the global economy depends on a functional Suez Canal, and the global economy is becoming increasingly reliant on megaships such as the Ever Given. A Japanese company owns this ultra-large container ship (ULCS), but it flies under a Panama flag. ULCSs are part of a new trend of building bigger and bigger container vessels to achieve greater economies of scale and turn a profit in the often fragile shipping market.
Egypt specifically expanded the canal in 2014 and 2015 to accommodate vessels such as the Ever Given, which is one of the largest globally, declaring that by 2023 it would bring in approximately $13.2-billion annually. Despite being reopened two years ahead of schedule, revenues in 2020 fell to under $6-billion, the Suez Canal Authority reports.
So this incident couldn’t come at a worse time for all concerned. The cost of the blockage to the Egyptian economy will be noticeable in the short to medium term. Both ship capacity and equipment-availability issues plague global supply chains that are still struggling with Covid-19-enforced regulations.
Last year almost 19,000 vessels used the Suez Canal – an average of 51 a day, with a net tonnage of over one billion tons of cargo. Usually, ships form convoys to traverse the Suez Canal. The average transit time is 14 hours.
The Ever Given was fifth in a northbound convoy when it veered sideways, and its bulbous bow struck the eastern bank with enough force to raise it slightly above the waterline. Because of its position, southbound traffic was blocked too.
Past experience of high-profile incidents involving other ULCSs suggests that refloating the vessel would take several days. The more optimistic might have hoped for a swift resolution given that the Jupiter only blocked the Port of Antwerp – Europe’s second-biggest port – for 12 hours in August 2017. The more pessimistic (and as it turns out prescient) instead recalled how, in 2016, the container ship Indian Ocean was stuck for six days outside of Hamburg before being refloated.
Four salient issues stand out that will affect Africa, especially if a blockage to a major shipping artery or port were to happen again.
Firstly, vessel operators were confronted with a dilemma most would rather not countenance – whether or not to embark on the 6,000-mile detour around the Cape of Good Hope. When the Suez Canal was completed in 1869 it did more than shorten shipping routes – it transformed Africa into one of the world’s largest islands. The immense African continent was no longer an impediment to shipping, and this became a pillar of global economic activity ever since.
On this occasion, a few decided to take the Cape route, which adds about a week to the journey, burns more costly fuel and requires extra vigilance while sailing through the High Risk Area off Somalia. This area has robust and effective counter-piracy measures in place, but more vessels increase the number of potential victims. Vigilance and adherence to best management practices are fundamental.
Although the route via the Cape of Good Hope beckoned, the distance, time, cost and sea conditions involved make it a prohibitive choice and many operators opted instead to wait and see. There remains an unresolved question about the degree to which African infrastructure along the Cape route can handle this increased traffic volume, especially regarding accidents and emergencies.
Secondly, the trouble associated with determining responsibility for maritime accidents is amply demonstrated by the ongoing controversy surrounding the 2020 grounding of Wakashio and its disastrous fuel leak.
Article 4 of the Suez Canal Authority’s Rules of Navigation provides that the owners of vessels using the canal are “responsible for any damage and consequential loss caused either directly or indirectly by a vessel … or to obstruct the navigation in the Canal.”
Operators moved quickly to allay fears that the grounding arose from a mistake or negligence. They swiftly stated that initial investigations ruled out any mechanical or engine failure as a cause, instead attributing the accident to a sudden strong wind.
Thirdly, as long as the Suez route remains dominant for international container trade on the Asia-Europe route, the Red Sea region could lie at the centre of intensifying geopolitical competition with multiple potential flashpoints. States will keep building bases and conducting long-range patrols, seemingly to prepare for persistent military engagement. Most European countries’ Indo-Pacific strategies more or less rely on permanent access to the Indian Ocean via Suez rather than sailing around the Cape to reach the Indian Ocean. While the problem at Suez is being resolved, another issue at the southern end of the Red Sea threatens to spell economic and ecological disaster – the abandoned and decrepit fuel tanker, FSO Safer, which lies off Yemen.
Finally, an extended blockage of a major port or waterway could severely affect trade, especially for landlocked African states.
There is a risk of congestion at some ports as the delayed cargo may now arrive at the same time as scheduled cargo. This challenge is compounded by both the Covid-19 pandemic and the predominant just-in-time shipping, whereby cargo is typically scheduled to arrive or be replenished precisely when, or shortly before, it’s needed in production.
National contingency plans for maritime accident blockages must be scrutinised and honed to ensure they don’t fall short if similar incidents happen again. We’ve been fortunate for a long time – major disruptions to maritime traffic haven’t occurred until now. Yet there’s very little margin, and taking the safety of shipping for granted is a luxury we cannot afford. DM
Timothy Walker, Project Leader and Senior Researcher, ISS Pretoria.
This article is funded by the government of Norway.
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