Original title: Observation in the International Year: How to avoid the pain of “stuck” when “blocking” the Suez Canal?
On June 23, with the conclusion of a principled agreement, the freighter “Longci”, the cause of the “Century Blockade” in the Suez Canal, is finally expected to set sail three months after being detained and continue its journey across the ocean. .
The accidental blockage of one of the busiest waterways in the world has staged a living teaching class in front of mankind. The unexpectedly sky-high cost of “class hours” has made all parties in the storm very “heartbroken.” Among them, the most difficult homework is how to “plug the gap” in the global supply chain to avoid the “stuck” pain from happening again…
Heartbroken!
Stranded “whale” brings unexpected consequences
As an important waterway “main artery”, the Suez Canal is currently the shortest route connecting Europe and Asia, and 12% of global trade flows through this waterway. However, the orderly navigation on the canal came to an abrupt end when the “Long Grant” accidentally bottomed out on March 23.
The animation demonstrates how the “Long Give” blocked the Suez Canal.Image source: Video screenshot of The Independent
“A heavy whale that ran aground on a tidal flat.” Berdowski, CEO of Royal Dutch Boscaris Westminster, who helped move the “Long Give”, described this ship as being almost erected like the Empire State Building. A huge cargo ship full of nearly 20,000 containers.
The “Longci”, which lay across the two ends of the waterway, blocked the way of hundreds of ships. In order to let the freighter go shallow, tugboats and excavators were deployed together, dredging, unloading and weight reduction were carried out in a multi-pronged approach. Finally, after being blocked for nearly a week, the Suez Canal was revived. However, this is not the end of the crisis. The butterfly effect produced by the “big ship jam” appeared one by one.
For shipping companies, in order to reduce losses, they had to make freighters change their routes and detour around the Cape of Good Hope in Africa. But at the same time, the price to be paid is that the voyage increases by at least 3,500 miles and the sailing time increases by 8-12 days.
The person in charge of a Brazilian toilet paper pulp production company said that due to the blockage of the canal, pulp transportation may be delayed, which in turn affects the supply of toilet paper. In addition, 130,000 livestock in Romania, furniture in 110 containers in Sweden, a large number of household appliances and electronic products…It is not just ships that are stranded on the Suez Canal.
The British company Snuggy, which has just been founded two years ago, has goods valued at 550,000 US dollars and is trapped on the “Long Give”, which is one of their only two large orders in a year. Co-founder Griffith said helplessly, “We are completely powerless.” Another company Easy Equipment’s $100,000 commercial refrigerator was supposed to be filled with food to witness the recovery of the British catering industry under the epidemic, but they are still stuck in Suez. On the canal “Big Bitter Lake”.
The world‘s insurance giant Allianz (Allianz) once estimated that the blockage of the canal may cause losses of approximately US$6 billion to US$10 billion per week to global trade. For each affected company, the losses suffered are not only irreparable in a short period of time, but may also affect the development of the next few years.
Not only that, but even more “heart-dead”, there are also the “Long Give” crew members who are waiting in the unknown anxiety. They don’t know what will happen in the dispute between the authorities and other parties; they are eager to set sail, they want to know when the ship will leave Egypt; they look forward to reuniting with their families soon… International Transport Workers Federation (ITF) coordinator Allah Chedi said that although seafarers play an important role in global trade, their status is rarely given priority.
Unblock?
“Compensation War” to find a way to reconcile, the freighter is expected to set sail in a few days
The loss is far more than that. The owner of the “Nagagi” freighter, Japan’s Masei Steamship Company, is facing even worse things.
Egypt took the lead to settle accounts with the “Long Grant”. After the blockage accident, the Canal Administration requested compensation for the losses caused by the six-day shutdown and related rescue costs, and claimed US$916 million from Zhengrong Steamship, which was then reduced to US$550 million.
In response, Zhengrong Steamship directly requested a 90% reduction in compensation. The company said that the authorities’ navigator on the Suez Canal made some mistakes, which affected its navigational safety in the waterway.
However, the Suez Canal Authority believes that the navigator is not responsible because its recommendations are “not mandatory.” In the results of the investigation conducted by the Administration, it was determined that the captain’s wrong instructions were the main reason for the ship’s grounding.
However, after being trapped for three months, “Long Give” has finally received good news recently. On June 23, the shipowner and representatives of the insurance company and the Canal Administration reached a principled agreement on the compensation dispute. The freighter that has been detained for several months is expected to be released and set sail within a few days.
“We agree to resolve this issue in a peaceful manner, without going through the courts, and reach an agreement on a final solution. The agreement is currently being drafted and will be reviewed later.” Suez Canal Authority Chairman Osama Rabie said.
The Wall Street Journal quoted people familiar with the matter as revealing that the preliminary agreement seeks compensation of approximately US$200 million. However, the figure has not yet been officially confirmed, and the amount of compensation is still confidential.
If the “Long Grant” is approved for release, it may need to undergo certain maintenance, or it may need to control the speed and sail slowly, and then it will sail to the Port of Rotterdam in the Netherlands.
To plug the gap:
Looking for another way out, how to treat the “arteriosclerosis” of the trade channel?
“Under the background of the new crown epidemic, the blockage of the Suez Canal has become the’straw’ that crushes global trade.” Bloomberg pointed out. The canal crisis in 2021 not only highlights the fragility of the global supply chain, but also makes the Panama Canal, the Strait of Malacca and other maritime traffic routes’ anti-risk capabilities leapt to become a priority for decision-makers.
The Egyptian side has recently decided to carry out comprehensive renovation of the canal, including widening and deepening the southern section of the Suez Canal, which is expected to be completed within two years. “It is a wise move to widen the canal,” commented Sal Mercogliano, a maritime historian at Campbell University in the United States. “But will ship operators make their ships bigger?”
This is true of history. In 1859, the Suez Canal was dug with French investment and was officially opened at the end of 1869. It became one of the busiest trade channels for oil, refined fuel, grain and other goods between Asia and Europe. Over the past few decades, the Egyptian government has widened, dug deep, and transformed the canal many times to improve navigation capabilities and promote national economic growth. But at the same time, the ships of shipowners and carriers are getting bigger and bigger, leaving a hidden danger of “arteriosclerosis” in the trade channel.
In recent years, the Suez Canal has repeatedly blocked the waterway. In 2004, the canal was “paralyzed” for three days when a 150,000-ton oil tanker ran aground, causing more than 100 ships to be blocked.
The scale of this “big ship jam” in 2021 is unprecedented. Many ship industry experts believe that the local government urgently needs to strengthen emergency response mechanisms, including upgrading facilities and tugboat equipment.
In addition, people from all walks of life have also begun to reflect: Should they “find another way out” for Asia-Europe trade and transportation so that they are not constrained by a canal?
There are mainly three schemes mentioned at present. First, the cargo ship detoured the Cape of Good Hope in the southern tip of Africa, but the route length was 70% longer than that of the Suez Canal, and it took more than 10 days.
The second is to build the Arctic waterway as an alternative. The Arctic waterway is shorter than the Suez Canal waterway, and it can save 10% to 30% of the time for cargo transportation. Although weather factors may affect the passage, the waterway has received more and more attention from logistics companies.
Third, change to land transportation. In recent years, rail transport services between Asia and Europe have developed rapidly. The freight cost is lower than that of air freight, and the transportation time is shorter than that of sea freight, which makes it have a great advantage under specific logistics needs.
In fact, the “stuck” incident sounded a wake-up call to the global trade and logistics industry in time: the global supply chain still does not have a good hedging method in the face of sudden and uncontrollable factors, and risk management capabilities need to be strengthened.
In this situation, it may be a more sensible choice to reduce excessive reliance on maritime “throat arteries” and to open up more sea and land passages through more diversified and modern methods.
Source: Chinanews
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