A second attempt to refloat the bulk carrier Ever Given in the Suez Canal failed on Friday effectively shutting down a vital channel for bulk and container trade, at least until Mar 28.
Two additional tugboats are expected to arrive on Sunday to help refloat the 400-metre-long ship, which has been stuck in the waterway since Wednesday, causing a blockage on this essential trade route, according to media reports. The Ever Given has the capacity to hold 20,000 metal containers for various goods.
The maritime traffic jam has left more than 100 ships stuck on either end of the waterway. This number will only increase if the efforts to refloat the Ever Given fail on Mar 28. Transportation times are also expected to rise by a third if ships are forced to take the alternate route through the Cape of Good Hope.
Market participants believe that the blockage will only increase the ongoing shortage in containers, and delays in the handling of scrap, which in turn could drive container freight rate increases and consequently commodity prices.
For ferrous bulk shipments, however, the impact is expected to be minimal as long as the carrier sails within a week. Turkey, a major destination for bulk shipments is well north of the canal so vessels sailing to Turkey are unaffected.
Typically, vessel delays and longer shipping routes for the vessels that get re-routed around Africa mean higher fuel consumption and drive up fuel costs. However, this is a seasonally weak demand period for oil and current price reactions to the situation have delivered margin price spikes of 2-3pc. Such increases will be passed on to long hauls, and not shorter hauls like the US to Turkey.
Only if the delay continues for more than a week, and should fuel costs have a stronger reaction, will bulk freight rates from the US to Turkey record a meaningful increase.