Extended blockage at Suez Canal leaves container market on tenterhooks

The extended blockage at the Suez Canal is leaving the container market on tenterhooks, market sources told S&P Global Platts on March 26.

While some container market participants had earlier said that they were taking a wait-and-see approach to the situation, amid expectations that the delay could be limited, the lack of success in efforts to refloat the tanker, the Ever Given, from its grounding is now beginning to cause more concern in the market.

Lars Jensen, the CEO of SeaIntelligence Consulting, said that the market is “now entering a period where the impact on container shipping begins to change from ‘annoyance’ to more significant impact.”

He added that, while container freight rates have not reacted to the situation in the near term, if the blockage isn’t resolved soon, vessel capacity could end up being removed from the market, delaying the process of replenishing empty containers in Asia. This would likely result in upward pressure on freight rates, he said.

This sentiment was echoed by other parts of the market.

“If the vessel moves out fast, there will not be a severe impact but if it’s stuck for long, we can see severe congestion and ultimately have an impact on prices,” according to Shinya Iino, CEO of HPS Trade Co. Ltd., who added that rates could start moving up from April 15 onwards.

Even as the impact on spot rates has been limited for now, market participants said they are not ruling out the possibility of an increase, especially in the form of higher surcharges and fuel costs.

“The Suez Canal blockage may have a major impact on prices and demand in Asian markets. It can worsen the container availability at ports. There can be new surcharges like emergency costs and bunker surcharges,” a source based in Hong Kong said.

Sources also noted that timing is key in the current market.

“There is a high tide Sunday night, that might be the crunch point of where we go next should the vessel not be able to sail away,” according to Nick Coverdale, founder of Agreefreight. “Old hands will have ideas and alternatives but will wait till Monday morning.”

Suez Canal: A key chokepoint in global energy trade flows | Ever Given

Meanwhile, traveling via the Cape of Good Hope has emerged as an alternative, with the Ever Greet, an ultra large container and a sister ship to the Ever Given, already turning south on its voyage to Rotterdam and appearing to be heading for transit via the Cape of Good Hope, Platts reported earlier.

“If you remember, at the beginning of the last year, a lot of carriers started to use the Cape of Good Hope, when Suez canal fees were planning to be increased, this would simply happen now again,” a source working with one multi-national company in China said.

The Ever Given container vessel ran aground in the Suez Canal on March 23 and has been blocking the critical commodity route connecting the Red Sea with the Mediterranean.

Charterer Evergreen Marine said earlier in a statement that its time chartered vessel has not yet been refloated despite 48 hours of proactive efforts. It added that it “will continue to coordinate with the shipowner and Suez Canal Authority to deal with the situation with the utmost urgency, ensuring the resumption of the voyage as soon as possible and to mitigate the effects of the incident.”

Container lines Maersk and Hapag-Lloyd have already warned of disruptions, with Maersk noting that nine of its vessels and two partner vessels have been directly affected. Hapag-Lloyd said in an email March 25 that five vessels have been affected.
Source: Platts