Suez Canal “ship jam”: Loss of $400 million per hour

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According to the latest news from the Russian Satellite Network on the 29th, after nearly a week of blockage, Egyptian President Sisi announced on the 29th that the dredging of the Suez Canal channel was successfully completed.

The Suez Canal is one of the largest and busiest waterways in the world. It is undoubtedly the most war-affected waterway in the world, both strategically and economically. The Suez Canal was built in 1869, connecting the Mediterranean Sea and the Red Sea. It shortened the transportation between Eurasia and the Cape of Good Hope by more than 5,000 kilometers. It is the shortest sea route from Europe to Asia. It only takes 11-16 hours you can pass. It is reported that about 12% of global trade volume passes through here, including 5% to 10% of global trade in energy commodities such as liquefied natural gas, crude oil and refined oil, and others include clothing, furniture, auto parts and other bulk consumer goods . According to the Suez Canal Authority (SCA), nearly 19,000 ships passed through the canal last year, carrying more than 1 billion tons of cargo.

According to media reports, Lloyd's Register, the world's largest classification society, estimated that after the "blockage" of the Suez Canal, the loss to world trade would reach US$400 million per hour, or about RMB 26.18 billion. Some analysts pointed out that this incident will make the already tense global logistics even worse, and it is expected that global shipping costs will further rise and set a new record.

Egypt's "Financial News" reported that about 30% of the world's oil that needs to be transported by sea has to be transported through the Suez Canal. The sudden cut off of the canal will bear the brunt of the impact on oil prices. So far, the stranded giant ship has disrupted the canal waterway for four days, preventing about 200 ships from transiting along the canal.

On March 23, the news that Taiwan's Evergreen Shipping Group's ultra-large container ship "Changci" blocked the Suez Canal channel once came out, which once boosted oil prices. On March 24, US WTI oil prices rose by more than 6%, closing at US$60.86/barrel that day, and Brent crude oil rose to US$64.1/barrel, an increase of 6.06%. However, it returned to the downward trend the next day, with US WTI oil prices falling by more than 4%, and Brent crude oil prices falling by more than 3%. On March 26, the main contract of WTI crude oil futures in the United States was reported at 60.97 US dollars per barrel, an increase of 4.3%. The main contract of Brent crude oil futures was reported at 64.57 US dollars per barrel, an increase of 3.8%.

With regard to the international crude oil supply that the market is concerned about, industry insiders pointed out that the freight rate of the Suez Canal is relatively high, and crude oil transportation from the Persian Gulf to Europe by sea often chooses to circumnavigate the Cape of Good Hope. Therefore, the blockage of the Suez Canal has a relatively limited impact on global crude oil shipping trade. Most of the "noise" brought to the crude oil market by the grounding of the Suez Canal freighter will not have a lasting impact on fundamentals.

The second is the impact on things such as daily necessities, fitness equipment, coffee, etc. Bloomberg reported that because many parts of the world rely on the Suez Canal to transport daily necessities such as toilet paper, the transportation of wood pulp on board will also be delayed. Created a shortage of toilet paper in stores. At present, Suzano, the world's largest wood pulp manufacturer, issued a warning in this regard, saying that the global freighter jam may cause the supply of wood pulp to be interrupted, affecting the supply of toilet paper.

The No. 29 East Canal stranded cargo ship has been announced to resume, but there are still many problems to be solved. In the future, how to prevent and alleviate the "massive ship jam" in the Suez Canal, how long the impact on the global supply chain and the economy will last... are all issues that people need to think about urgently.