The Suez Canal is integral to the nine percent of global oil products and 12 percent of total global trade that passes through it.
Global shipping routes have been massively disrupted after the Ever Given container ship found itself wedged sideways between the Suez Canal. Shipping was already under strain from the Covid-19 pandemic.
The 400 metre long ship, which in length is as long as the Empire State Building is tall, has caused the worst traffic jam on earth, blocking transit in both directions through one of the world’s busiest shipping channels for oil and grain and other trade linking Asia and Europe.
The ship is registered to Taiwan’s Evergreen Marine Corp.
Eight tugboats are currently working to free the vessel - stuck diagonally across the canal due to high winds and a dust storm - according to the Suez Canal Authority(SCA).
Amid the salvage efforts of the container, Peter Berdowski, CEO of Dutch company Boskalis is trying to save the ship. He has said: “We can’t exclude it might take weeks, depending on the situation.”
So what does such an extraordinary incident in the canal’s 150-year history mean for world trade?
Share of world trade
The Suez Canal, which officially opened in November 1869 in Egypt, is one of the world's most densely used shipping lanes in the world. It is also the longest one in the world, one without locks and that boasts a near-zero history of accidents.
The canal is famous for being the shortest maritime route between Europe and the western Pacific and Indian oceans.
The 193 km long man-made canal connects Europe and South Asia without forcing anyone to navigate around Africa - this reduces the distance by 7,000 km for ships.
Nearly 30 percent of the world’s shipping container volume passes through the Suez Canal daily.
It has been used in about 12 percent of total global trade of all goods in recent years.
Currently, the blockage of the canal is estimated to be costing $400 million per hour.
Importance in oil industry
Together with the Strait of Hormuz and the Strait of Malacca, the Suez Canal is critically important to global oil trade.
It is a strategic route for Persian Gulf crude oil, petroleum products and liquefied natural gas (LNG) shipments to Europe and North America.
The canal, together with the SUMED pipeline, used to transfer oil from the Suez Gulf to the Mediterranean Sea, accounted for nine percent of total seaborne-traded petroleum in 2017.
According to Vortexa’s preliminary intelligence, 10 crude oil tankers that carry a total of 13 million barrels of oil, have already been or could soon be affected by the traffic jam.
“The longer the outage takes, the more knock-on effects will materialise including a shortfall of sour crudes for European refiners and wider shipping delays affected the next cargo bookings,” Vortexa said.
Suez Canal Update [VIDEO]: "If flows remain disrupted for more than a few days, some European refiners could run short, particularly of sour crude feedstocks and tighten an otherwise weak physical European market." #OOTT #freight #oilgas #shippinghttps://t.co/7jlwlEIRa4— Vortexa (@Vortexa) March 25, 2021
Nearly 3.9 million barrels of crude oil products passed per day through the Suez Canal in 2016.
Russia, Saudia Arabia and Iraq are the top exporters of oil products. They export their 546,000 410,000, 400,000 barrels per day, respectively, via the route.
On the other hand, 490,000, 420,000 and 380,000 barrels of oil per day are imported via the canal by India, China and South Korea.
After the incident, Brent crude oil price increased by six percent, reaching $64.09 on Wednesday.
However, oil prices fell on Thursday as a new round of coronavirus restrictions in Europe revived concerns about the demand for oil products, even as tugboats struggled to move a stranded container ship in the Suez Canal.