Suez Canal blockage allows China, Russia push for shipping business

CORRECTION: The initial version of this story identified the Ever Given as a tanker. It is a cargo ship.

The Suez Canal reopened for business Monday after salvage crews freed a massive container ship that spent the past week blocking the crucial waterway, while stakeholders around the world — including China, Russia and even American political advocacy groups — seized on the incident to push their own agendas.

As an international team of tugboats and dredging companies pried loose the massive Ever Given cargo, government officials and business analysts were speculating how the incident could spark major changes in the global transportation network and may reset the norms of international shipping. Moscow argued that the Suez shutdown underscores the need for alternative routes, such as shipping lanes in the thawing Arctic. Chinese business leaders said nations should take another look at freight rail through Asia as a more reliable means to transport goods.

After seven days, the financial fallout of the Ever Given’s grounding was significant. It cost an estimated $9 billion each day as hundreds of ships remained stuck at either end of the canal with few options but to wait for crews to clear the path ahead. Some of those vessels resumed their journeys Monday after a monumental, multinational effort that captured the world’s attention and inspired a boatload of social media memes.

“We pulled it off,” said Peter Berdowski, CEO of Boskalis, a salvage firm that played a leading role in freeing the Ever Given. “I am excited to announce that our team of experts, working in close collaboration with the Suez Canal Authority, successfully refloated the Ever Given … thereby making free passage through the Suez Canal possible again.”

Tugboats pushed and pulled the ship while dredgers vacuumed up sand and mud below. Rising tides Sunday night into Monday morning aided the entire operation.

But the ordeal is far from over. The Ever Given is being inspected for damage before it is permitted to complete its voyage to Rotterdam, in the Netherlands. Ports around the globe are bracing for an unprecedented rush of backed-up business while the COVID-19 pandemic wreaks havoc with operations.

Egyptian officials celebrated the operation to free the ship, which some feared could take weeks to refloat. But their country bore the immediate brunt of the weeklong blockage. The Egyptian government lost an estimated $95 million in tolls because of a lack of traffic through the canal.

President Abdel-Fattah el-Sissi reportedly may seek compensation from the Taiwanese container transport company Evergreen Marine Corp., which chartered the Ever Given. Russia-based Sputnik News quoted unidentified Egyptian officials as saying the nation will seek payment for the lost tolls.

The ship’s Japanese owners likely face major fines and costs associated with delays from the Ever Given’s plight. Analysts said reinsurance companies will bear much of the losses for delays and extra fuel costs.

The Suez Canal is critical for trade between Europe and Asia, but the direct impact on U.S. companies and consumers is expected to be slight. Most U.S.-bound shipping comes directly across the Atlantic and Pacific to ports on both American coastlines.

Long-term fallout

The entire drama, with the forlorn overloaded ship marooned with its bow in one bank and its stern stuck in the other, lasted less than a week. But the long-term repercussions will stretch far beyond Egypt.

The Suez carries more than 10% of all international trade, including about 7% of the world’s oil supply, casting a fresh spotlight on the vulnerabilities of the global just-in-time economy and how easily it can be grind to a halt.

“This is a warning about how vulnerable our supply chains are and how the just-in-time inventory techniques that have been so popular have to be rethought,” William Lee, chief economist at the Milken Institute, told The Associated Press. “The shortages and the supply chain shortages that cause assembly lines to shut down — that will have a greater impact.”

In the U.S., some political groups are pushing the Biden administration to take a tougher line toward China. They argued that China’s overseas infrastructure investments as part of its worldwide Belt and Road investment program could give it leverage in nations such as Panama, whose canal also plays an indispensable role in facilitating global trade.

“Given the United States’ dependence upon the Panama Canal for a significant amount of our trade, it is important that the Biden administration redouble efforts to thwart the Communist Chinese Belt and Road initiative, which is currently investing heavily in Panama with an eye toward gaining dangerous influence over this pivotal Central American country,” Rick Manning, president of the conservative advocacy group Americans for Limited Government, said in a statement.

Mr. Manning also singled out the Strait of Hormuz, a key waterway off the Iranian coast and an irreplaceable cog in the international oil market. China recently signed a major economic partnership agreement with Iran, potentially giving Beijing leverage over that passageway as well.

The Chinese government so far has said little about the long-term implications of the Ever Given, but some Chinese business leaders are trying to capitalize.

“Some of our goods are stranded on the Evergreen Marine and other ships queuing in the canal, and we are offering more alternatives for our clients with urgent needs. One is to use cross-border cargo trains,” Zhou Shihao, CEO of YQNLink, a Chinese cargo and freight company, told the Global Times newspaper. “What normally takes 30 to 40 days by ship from China to Europe takes only 15 to 25 days by train.”

The newspaper also quoted several “industry insiders” in China who said they have seen increased demand for Asia-to-Europe rail routes as an alternative to the Suez Canal.

A major international move toward China-based rail could represent a major economic and geopolitical win for Beijing, which is trying to supplant the U.S. as the world’s top economic power.

Russia also sees a potential opportunity. The nation’s energy ministry on Monday highlighted the “Northern Sea Route” as a viable option beyond the Suez Canal.

To move goods to Asia, the northern route is about 4,000 nautical miles shorter than going through the Suez. But it runs through icy Arctic waters, making it logistically challenging for shipping companies, particularly in winter.

Still, shipping volume hit nearly 33 million tons last year and will reach 80 million tons by 2024, Reuters reported Monday. Russian President Vladimir Putin has cast the Northern Sea Route as a central part of Moscow’s long-term economic development plan.

While rising temperatures are melting Arctic ice and opening new waterways, governments and private companies still need to invest heavily in icebreaker ships to make it through the frigid region year-round. Last week, Finnish ship designer Aker Arctic rolled out an icebreaker container ship that could operate in Arctic waters through all seasons.

“No such type of container ship has been available before,” Luigi Portunato, a naval architect with the company, told the news outlet Arctic Today.

• This article is based in part on wire service reports.