The blockage of the Suez Canal by mega container ship Ever Given has sent ripples through global commodity markets.ACCESS THE TOPIC PAGE
The Ever Given, the containership that was stuck in the Suez Canal in March, has been arrested by Egyptian authorities over non-payment of a claim of around $916 million, maritime insurance, shipping agent and broker sources said April 14.
The ship and its crew were arrested by Suez Canal authorities, pending settlement of the claim, sources said. Neither Shoei Kisen -- the ship's Japanese owner -- nor the Suez Canal Authority were available for comment. The SCA's claim against Shoei Kisen includes $300 million as a salvage bonus and $300 million for loss of reputation. The claim on reputation has been disputed by Shoei Kisen and its insurer, sources said. The ship is insured by UK P&I Club which has described the arrest, which came nearly a week after the SCA made its claim, as "disappointing", sources said, adding a counteroffer has been made to settle the claim. "The magnitude of the claim is very high and it is not fully supported," said a maritime insurance executive familiar with the developments.
During the negotiations, Shoei Kisen noted there had been no injuries and no pollution when the Ever Given was stranded and, therefore, the claim should not be so high, another insurance source said. The UK P&I club was seeking a detailed justification for the claim and has pointed out that the ship was floated in less than a week and commercial operations resumed thereafter, the executive said.
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Oil Market Implications
In this episode of the Oil Markets Podcast, S&P Global Platts reporters Charlotte Bucchioni and Britt Russell-Webster discuss with Joel Hanley the impact of the blockage on freight and fuel markets, as well as the outlook as the queue slowly clears.
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The oil futures market has been volatile on news that a large container ship was blocking the Suez Canal, a key artery for petroleum shipments, but do spot markets give a better indication of the impacts on global trade flows?Listen and Subscribe to the Podcast
New Transit Routes
The HMM Rotterdam, an ultra large container ship has turned south on its voyage Eastbound from Europe and appears to be heading for transit via the Cape of Good Hope, rather than join the ever lengthening queue of ships waiting for the Suez Canal to reopen, data from S&P Global Platts trade flow software cFlow showed March 26.
- The HMM Rotterdam is a 23,000 twenty-foot equivalent unit container ship.
- PD fundamentals reveal a mid- to long-term credit risk pattern based upon financial statement data.
- As of March 26, there were 23 container ships awaiting transit of the Suez Canal at Port Said, north of the canal, 11 container ships currently in Great Bitter Lake, and 21 container ships waiting at anchorage south of the Suez Canal.
- Most container ships travelling through the Suez Canal are either destined for European ports, or heading on the backhaul route back to Asia from Europe.
- Since Ever Given is only around 11 km into the canal in the northbound direction, it will either have to be taken north to Suez or forward into the Great Bitter Lake, a maritime navigator tracking the development said.
- French carrier CMA CGM said in a statement March 26 that so far two of its vessels are queuing in the Suez Canal waiting to enter the passage, with four more vessels expected on March 26.
The insurance industry faces a claim in the low hundreds of millions of dollars after a container ship blocked the Suez Canal, a major trade route.
But the freeing of the Ever Given, a 20,000 twenty-foot equivalent unit-capacity container ship, on March 29, six days after it ran aground, means the industry has avoided a much larger claim.
- Marcus Baker, global head of marine and cargo at insurance broker Marsh LLC, said in an interview that the claim would be "significant" and "still a couple of hundred million [dollars], but it's not a billion."
- The authority will likely bill the ship's owner for a combination of damage to the canal itself, its assistance in the salvage — such as the hire of tugs and dredgers — and loss of revenue.
- Uncertainty remains about the size of the Suez Canal Authority's claim for loss of revenue. Some estimates have put the authority's daily revenue at $15 million, based on its annual revenue.