Suez logjam continues to grow as efforts to refloat grounded ship persist

London — Uncertainty around the reopening of the Suez Canal is continuing to disrupt the global trade route for commodities, more than 72 hours after the container ship Ever Given ran aground in the key waterway.

The backlog of global shipping traffic caused by the closure of one of the world's key commodity chokepoints is now expected to take weeks to clear, market watchers said March 26.

Freight rates on tankers and containers have risen sharply as tonnage lists start to shrink as ships divert from their original trade routes to avoid being caught up in the log jam.

Bernhard Schulte Shipmanagement, or BSM, the technical manager of the Ever Given, said in a statement March. 26 that recent attempts to refloat the ship, with many tugboats and dredgers had been "unsuccessful."

A specialized suction dredger is being used at the site and arrangements to use more tugboats and high-capacity pumps are being planned for March 28, added BSM.

Japan's Shoei Kisen Kaisha, the owner of the ship, said it aims to fully refloat the Ever Given, by late March 27.

But some other companies involved in the salvage operation expect it to take longer. Royal Boskalis Westminster, which has been hired to help refloat the giant container, has said salvage operation could take days to weeks.

The US White House said it was "tracking the situation closely" and has offered assistance to Egypt in removing the container ship.

"We have been consulting with our partners about how we can best support their efforts," White House Press Secretary Jen Psaki said in a press briefing.

A strategic route for crude oil, petroleum products and LNG shipments, the 120-mile canal connects the Red Sea with the Mediterranean and sees more than 18,000 ships transit each year, according to the Suez Canal Authority. Almost 10% of total seaborne oil trade and 8% of global LNG trade passes through the Suez Canal, according to the US Energy Information Administration. Before the pandemic hit trade flows, the canal transported some 5 million b/d of crude and oil products and 31 million mt of LNG in 2019, according to S&P Global Platts Analytics and data from the Suez Canal Authority.

MASSIVE BACKLOG

There are already around 240 ships -- including crude, product and chemical tankers, dry bulk carriers and container vessels -- waiting to transit the canal from both sides, according to data from Platts tanker tracking service cFlow.

By 1510 GMT, there were at least 22 crude tankers, estimated to be carrying around 18 million barrels, and 23 product and chemical tankers, holding around 1,000,000 mt, waiting to navigate through the canal, according to cFlow. Some ships have started to divert from their original trade routes and head the long way through the Cape of Good Hope rather than the Suez Canal.

The oil tankers are carrying crudes such as Saudi Arabia's Arab Light and Arab Extra Light, Libya's Es Sider, Mexico's Maya, Iraq's Basrah Light and UAE's Murban, and also refined products including naphtha, jet fuel, gasoil, and fuel oil, according to cFlow.

The rerouting to the Cape could add as much as 20 days to a voyage from the Middle East Gulf to Rotterdam that would normally go via Suez.

Refined product shipments from the Persian Gulf and India to Europe are expected to be delayed by up to a week as clean tankers, both Long Range and Medium Range, are unable to cross the canal.

Sources said the current backlog could take almost 10 to 14 days to clear.

Around seven LNG carriers have been diverted, out of which four were laden and three were ballast ships, according to shipping data provider Kpler. LNG carriers booked to take Qatari LNG through the Suez have turned around in the Red Sea, S&P Global Platts' trade-flow software, cFlow, showed.

FREIGHT STARTS TO CLIMB

Freight rates on some tanker routes are already starting to jump, as the disruption has lasted longer than many first expected.

Crude tanker rates in the Mediterranean rose sharply on March 26 amid prompt replacements of tonnage stuck on the other side of the Canal. A fixture was reported at Worldscale 170 on the Ceyhan-to-Mediterranean run 80,000 mt for March 29 loading, up w35 from last done on the route.

This is exactly the type of disruption "which all tanker markets have been crying out for to lift rates and earnings," Alphatanker, a market analysis division of shipping brokerage BRS said in a research note.

"The longer this disruption persists, the tighter tonnage rates will become and the greater the upside to tanker hire rates," it added.

Platts Analytics said a longer protracted closure could "lead to a spike in freight rates, impair refining margins and inject further volatility" into oil and gas prices.

Cargoes looking for replacements from the Black Sea continued to rise as many shipping fixtures failed their subjects, with market participant pegging the market at w100 on the Black Sea-to-Mediterranean run

"Charterers from the Black Sea have very limited options as you must take a ship that is already in the Eastern side of the Mediterranean," a broker said. "Nothing is likely to happen today, but if it does, the rate will be extremely high"

Some oil traders are looking to move the loading date of some crude cargoes, especially those loading in the Mediterranean and Black Sea, sources said.

Crude from Libya, Azerbaijan, Kazakhstan, Algeria are likely to be affected the most, as a sizable chunk of their oil heads east on Suezmaxes and Aframaxes through the Suez Canal.

Before the pandemic hit trade flows, the canal transported some 5 million b/d of crude and oil products and 31 million mt of LNG in 2019, according to S&P Global Platts Analytics and data from the Suez Canal Authority.