Here’s how a blocked Suez Canal can affect prices of goods and oil

A massive container ship is still blocking the Suez Canal in Egypt since Tuesday morning, bringing cargo-ship traffic to a standstill. The hold-up will affect “basically anything you see in the stores” as the canal is responsible for 12% of the world trade.

The container ship—the Ever Given, is operated by the Evergreen Marine Corporation. It departed from Tanjung Pelepas in Johor and was headed to Rotterdam in Netherlands.

The ship became stuck sideways in the Suez Canal after a severe dust storm. So far, all attempts to get the Ever Given moving again have failed.

According to the Suez Canal Authority, nearly 19,000 ships passed through the canal during 2020—an average of 51.5 per day. Currently, more than 150 ships are still waiting to pass through the 120 mile canal. According to MarineTraffic, plenty of ships are still waiting for the block at the Suez Canal to free up.

“As delays continue, shippers will have to broach the unpalatable decision of whether to make a U-turn and head for the Cape of Good Hope or wait it out in the Red Sea and Mediterranean,” commodity data company Kpler.

Each day of blockage disrupts more than USD 9 billion (RM37 billion) worth of goods, according to The Associated Press. The closure could also affect oil and gas shipments to Europe from the Middle East, which rely on the canal to avoid sailing around Africa.

Lars Jensen, an independent container shipping expert, fears that “basically anything you see in the stores” will be affected by this delay. This ranges from “food, furniture, clothes, shoes, exercise equipment, electronics, car parts, and carpets”.

“If they are able to clear the channel or pull the vessel to the side to allow traffic to flow through, then there should be minimal impact to consumers. If the vessel remains stuck for a week or more, this could have massive implications,” said Glenn Koepke, senior vice president of customer success at logistics software company FourKites.

Shoei Kisen, the owner of the Ever Given, apologised for the hold-up, and added that getting the ship moving has been “extremely difficult”. However, he stated that there were “no injuries or oil spillage” caused by it.

The Ever Given contained consumer goods bound for European markets in 20,000 standard shipping containers, and 25 crew on board. The ship is expected to face claims totalling millions of dollars—even if it is refloated quickly.

Suez Canal is an artificial sea-level waterway connecting the Mediterranean Sea to the Red Sea through the Isthmus of Suez and dividing Africa and Asia. It has been a crucial link for oil, natural gas and cargo. 

The blockade could potentially increase global oil prices which has been increasing in the past few weeks. At the moment, RON97 petrol in Malaysia is priced at RM2.50 per litre which is the highest since January 2020. However RON95 is still priced at RM2.05 per litre due to the set ceiling price that’s subsidised by the government.

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