Suez crisis and the fragility of global trade
The closure shows how an accident can trigger a major fiscal and supply-side crisis. Instituting new protocols is essential
The closure of the Suez Canal, one of the world’s most critical water bodies, due to a large container vessel, the MV Ever Given, running aground on March 23 while in transit, has caused enormous disruption to global shipping. Sustained efforts by the Suez Canal Authority (SCA) and the Egyptian government to dislodge the vessel and refloat it have been less than successful.
More than 300 ships waiting to cross the Suez that connects the Mediterranean Sea to the Red Seahave piled up on either side of the canal. On an average, 50 ships transit the Suez every day and, as per SCA, in 2020, nearly 19,000 vessels with a net tonnage of 1.17 billion tonnes transited the canal, which is the second-highest load in the history of the Suez. The value of goods shipped through the canal is estimated to be $9.5 billion daily — the MV Ever Given, for example, was laden with cargo worth $1 billion. Annually, this is about 8% of global trade and the canal generated $5.3 billion in revenue for the Egyptian exchequer in 2017.
The origins of the Suez Canal go back to the ancient period and the first waterway was dug during the reign of Senausert III Pharaoh of Egypt (1874 BC). However, this rudimentary canal was abandoned due to silting and reopened several times in the intervening centuries. The modern Suez was built in the mid-19th century through efforts by the French and opened for navigation on November 17, 1869. This was a tectonic development for global maritime connectivity and impacted colonial history in a definitive manner. The rise of the British Empire was enabled considerably by this canal. Since its inauguration, the Suez has been closed five times — the longest period being the eight years from 1967 to 1975 during the Arab-Israeli conflict.
The current closure will be very expensive for global trade — the shipping industry and insurance companies — and it is estimated that the loss per hour is almost $400 million. Some positive movement is being reported, and it is hoped that the Suez will soon be open for transit. In the event that the MV Ever Given remains wedged across the breadth of the canal for a longer period, the negative impact on the intricate and delicately balanced global supply-chain and oil prices will impose additional costs on the customer globally.
This aspect points to the fragility of global trade. While the worldwide logistic management chain has acquired a high degree of efficiency by way of manufacturing goods to tight schedules and keeping inventory/warehouse/shipping costs to the bare minimum, even while ensuring timely delivery to the customer, an unforeseen accident such as the Suez closure can lead to a cascading downstream disruption of trade with attendant economic consequences. This is bleak news in a Covid-19-scarred world.
The Suez along, with the Panama (that links the Pacific and Atlantic oceans), are the two most critical canals in the global maritime domain along with the Volga-Don and the Grand Canal (China). Each canal has its own navigational challenges and protocols, and in most cases, local pilots are deployed for every ship to ensure safe passage. Tug boats are used to enable the safe passage through restricted waters, and as the history of the Suez demonstrates, the kind of canal closure related to the MV Ever Given is an exception.
While the exact cause for the current accident is yet to be ascertained, preliminary reports suggest that very strong wind conditions that occur often in the region may have exacerbated the complex transit of a large vessel. In shallow waters, when a heavy vessel displaces water, it is not replaced immediately as would be the case in deeper waters and a partial vacuum occurs near the propeller. Steering behaviour can then become sluggish and this is compounded by what mariners refer to as “smelling the ground” when a ship in a channel nears a shoal and then lurches from one side to the other, making it difficult to navigate.
Whatever the final verdict about why the MV Ever Given ran aground, it would be fair to surmise that the causes would be a mix of material failure, human error and unanticipated local conditions. Given the scale of the consequences — both fiscal and supply-chain disruption — the need to objectively review existing procedures and protocols specific to the Suez merits the highest priority.
Incidentally, the crew on board the stricken MV Ever Given are all Indians and while the resilience of merchant ships and maximum profit orientation of the shipping industry are under scrutiny, the welfare of the seafarer in these times merits policy review. Working conditions at sea for the crew are very exacting and this is an issue that warrants empathetic attention even as global attention is focused on ensuring that the Suez Canal is navigable again.
Commodore C Uday Bhaskar (rtd) is director, Society for Policy Studies
The views expressed are personal