At least two Indian-owned ships are stuck in the marine traffic jam caused after a huge cargo ship became wedged across Egypt’s Suez Canal.
“Two Indian ships joined a total of around over 150 ships waiting on either side of the Canal,” said Anil Devli, chief executive officer of the Indian National Shipowner's Association (INSA). The association said there was no immediate information on the identity of the ships or the cargo they are carrying.
Devli added that Indian ships headed towards the canal, one of the world’s shipping routes, could be diverted, but that call will be taken by the shipowners only after a couple of days, when there is better clarity on how long it will take to dislodge the stuck container ship.
As per estimates, cargo worth around $10 billion is expected to get stuck a day due to the logjam. Traffic on the route is halted in both directions after Evergreen Marine’s ship Ever Given ran aground in the Egyptian canal after being caught in wind and sandstorm that caused low visibility and poor navigation. According to a Bloomberg data, the number of ships stuck on both sides increased to 240 on March 26, from around 150 a day before.
Interestingly, the entire crew of the ship that got stuck in the Suez Canal was Indian. “Logic says that shipowners will take a decision in the next one or two days. Right now, a lot of work has already been done in pulling that vessel out. If in the next two days, this gets alright, then the canal can do about 50 movements in a day, in and out. Hence, 150 ships is not a difficult task at all,” Devli added.
Longer African route could jack up tariffs
The advantage for Indian ships in taking the Suez Canal over coming around the Cape of Good Hope is that it takes at least two weeks less in travel time and tariff rates are low too. If ships are diverted it may face additional distance and sailing time.
“There may not be much impact on crude imports as the majority of our trade is from the Middle East. Regarding other goods, around 20-25 per cent of our cargo is coming through that route. Especially, the trade with Europe and the US will get affected immediately,” said Anand V Sharma, Mantrana Maritime Advisory. Sharma added that if the crisis continues for a longer time, it may lead to a big hike in container transportation tariff.
A day's blockade in the Suez Canal may lead to a severe financial impact on global trade as the route between Asia and Europe around Africa is a week slower. The situation may also result in a shortage of container vessels and boxes, as close to 30 per cent of the global container traffic is passing through the Suez Canal.
According to data available with Suez Canal Authority (SCA), the canal handles around 51.5 ships per day. Around 18,829 ships carrying around 1.17 billion tonnes of cargo passed through the canal in 2020. “This is the shortest route for Indian cargo coming from that region. Hence, if the bottleneck is not sorted out, it may have a long-term impact on the country’s maritime sector, especially because of higher tariffs,” said a senior official from The Tariff Authority For Major Ports (TAMP).
This is the third time that Suez Canal is facing a shut down since it opened in 1869. Operations were first affected between 1956 and 1957 during the Arab-Israel war. The second such instance happened in 1967 when Israel occupied the Sinai peninsula and didn't reopen until 1975. However, this bottleneck is expected to be for a shorter period, as dredgers are already working on the removal of sand up to a depth of 16 meters.