Blockage of the Suez Canal, March 2021

Blockage of the Suez Canal, March 2021

On March 23 2021, the containership Ever Given ran aground in the Suez Canal. The vessel’s bow got lodged in the eastern bank of the Canal. The Ever Given measures 400m long with a beam of 59m and a capacity of over 20,000 TEU. Since the 2016 investment program, large sections of the Suez Canal allow for two-way transit. However, the incident occurred in the southern section of the Suez Canal, which has only one navigation lane, which resulted in the complete blockage of all transits. The exact cause of the incident has not been revealed yet. At the time of the incident, the vessel experienced high tailwinds and a dust storm. The containership was sailing at around 13.5 knots, while the normal speed for Canal transit is 7.5 to 8.5 knots. The vessel did not have a tugboat escort through the canal, while the two ships immediately ahead of it had escorts, though such escorts were not required.

On March 29, the containership was refloated and towed away to the Great Bitter Lake. Smit Salvage, a subsidiary of the Dutch Boskalis group, assisted in refloating the vessel on a ‘no cure no pay’ basis. This included the deployment of large dredgers and backhoe cranes to remove more than 30,000 cubic meters of sand from around the ship’s bow, while 11 harbor tugs and two powerful seagoing tugs were used to free the vessel. Canal operations resumed shortly thereafter. The main impacts of the blockage include:

  • A traffic jam on both entries of the Canal (the Mediterranean and the Red Sea) where more than 430 ships were forced to wait. Each additional day of delay was tying up an additional 0.5% of the global shiping capacity waiting in queues. For shipping lines, this resulted in time costs for the vessels, a loss of revenue, and a loss of capacity. The backlog of ships in the Suez Canal was cleared on April 3. On a normal day, some 50 ships pass through the Suez Canal (18,840 ships in 2020). To clear the backlog, peaks of more than 100 transits per day were recorded, pushing the limits of the Canal’s transit capacity.
  • Trade and supply chain disruptions as several shipments were delayed, particularly European imports from Asia. The blockage held up some USD 9 billion in global trade each day, leading to time costs of the goods (i.e. economic depreciation, technical depreciation, and opportunity costs of capital). The Suez blockage further added to a constriction in shipping capacity and equipment, and consequently, some deterioration in supply chain reliability. Several weeks after the opening of the Canal, European ports experienced peaks in vessel arrivals, further increasing the pressure on seaport terminals, which was already high due to the peak in cargo demand induced by the COVID-19 pandemic.
  • Loss of revenue for the Suez Canal authority, including salvage cost, in the range of USD 100 million. Revenue linked to the Suez Canal transit fees reached USD 5.6 billion in 2020.
  • Diversion of dozens of ships through the Cape Route around Africa as for 6 days the situation remained uncertain, with shipping lines deciding to re-route some of their ships, even if this entailed about 7 to 10 additional sailing days. For the 27 ships that opted for the Cape route, the new estimated times of arrival were roughly the same as if they had stayed.

The incident once again demonstrates the international nature of the shipping industry. The Ever Given is registered in Panama, operated by Evergreen shipping line, and owned by Shoei Kisen Kaisha, a shipowning and leasing subsidiary of the Japanese shipbuilding company Imabari Shipbuilding. Its technical management is the responsibility of the German ship management company Bernhard Schulte Ship Management. UK Club is the P&I insurer, while the ship’s hull is insured by Japan’s MS&AD Insurance Group.

After the refloating of the Ever Given, she was escorted to the Great Bitter Lake for inspections. On April 13, Egypt impounded the vessel and sought compensation. In late June 2021, Ever Given’s owners reached an agreement in principle with the Suez Canal Authority for the ship’s release.