Cairo: The report that the massive container ship that blocked the stretch of the Suez Canal is finally re-floating in the right direction is a piece of good news for the global economy as a whole.
That is because the Suez Canal, that connects north Atlantic and northern Indian oceans via the Red Sea and the Mediterranean Sea, handles about 12 per cent of the global trade, around one million barrels of oil and roughly 8 per cent of liquefied natural gas passing its route.
The breakthrough in the rescue attempt came after diggers removed 27,000 cubic meters of sand, going deep into the banks of the canal.
On last Tuesday, Panama-flagged, Japanese-owned ship named Ever Given was stuck in a single-lane stretch of the canal, leading to a logjam of more than 450 ships.
The Economic Loss
Lloyd’s list predicted an hourly enormous loss of about $400 million per hour, affecting $9.6 billion worth of trade per day.
Looking at the bigger picture, German insurer Allianz said on Friday its analysis showed the blockage could cost global trade between $6bn to $10bn a week and reduce annual trade growth by 0.2 to 0.4 percentage points.
Besides, prior to the pandemic, trade passing through the Suez Canal contributed to 2% of Egypt’s GDP, according to Moody’s.
Suez Canal Authority chairman Osama Rabie on Saturday said that the Canal’s revenues were taking a $14-15million hit for each day of the blockage.
Also, oil prices jumped on Friday, amid speculation that dislodging the ship could take weeks.
Economists say the Ever Given’s disruption of shipping through the Suez Canal probably won’t have an impact on global trade for more than a few weeks, and is unlikely to derail global growth this year as more people get COVID-19 vaccines and economies reopen.
Suez Canal’s importance
A simple answer is its location. Strategically located, the man-made Suez Canal directly connects the waters of Europe with the Arabian Sea, the Indian Ocean and the Asia-Pacific countries.
Without this canal, the trade ships would have to traverse the entire continent of Africa–the only alternative–via the Cape of Good Hope, adding hefty costs and substantially extending their journey times.
The 120-mile (193 km) canal thus was constructed over the course of a decade in the nineteenth century.
The Suez has been shut down before; for eight years from 1967, when it became a border between a warring Egypt and Israel, a conflict that left more than a dozen ships — known as the Yellow Fleet — trapped in the canal for the duration.
(With agency inputs)