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Stranded Ever Given container ship released from Suez Canal

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Stranded Ever Given container ship released from Suez Canal

Highlights

Owner and SCA agree formal compensation deal

Ship is en route to Port Said for a technical inspection

Closure of Suez Canal caused huge disruption to global trade

The ultra large container vessel, the Ever Given that was stranded in the Suez Canal for more than 100 days, has been released July 7 after a formal deal was agreed with the Suez Canal Authority, said the ship's owner Shoei Kisen Kasha.

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The ship will proceed to Port Said in Egypt for technical inspections and subject to the approval from its classification society, the American Bureau of Shipping, or ABS, the container ship will then complete her voyage and the cargo will be discharged, the Japanese company said in a statement.

The Ever Given ran aground on March 23 and blocked the canal for almost a week before being freed on March 29 with the help of 13 tugboats and several dredgers.

But on April 13, the ship was seized by Egyptian maritime authorities who were demanding compensation for the damage to the canal and the business that was lost as a result of the incident.

Sources said the ship was arrested over the non-payment of a claim that was initially assessed at $916 million, but reduced in May to around $600 million.

The Ever Given was moving northwards of the Great Bitter Lake region of the Suez Canal at 1420 GMT at a speed of 9.7 knots, according to data from S&P Global Platts trade flow software cFlow.

The Suez Canal Authority, or SCA, could not be immediately reached for comment.

A source said that the eventual plan is for the ship to head towards its original destination of Rotterdam in The Netherlands, followed by Antwerp in Belgium and Hamburg in Germany.

The closure of the Suez Canal resulted in a logjam of almost 400 ships -- including crude, product and chemical tankers, dry bulk carriers and container vessels -- waiting to transit the waterway from both sides, according to data from cFlow.

Insurance cover

The actual compensation being paid to the canal authorities has not been divulged but at first instance it is to be borne by the insurers and later divided among the stake holders, sources said.

The ship's P&I cover is provided by the UK P&I Club. The hull and machinery insurance coverage is led by Tokyo-based Mitsui Sumitomo Insurance Group, said sources familiar with negotiations.

"From the outset the UK P&I Club, together with the ship's owners and other insurers, has been focused on reaching a fair and amicable settlement with the SCA that would allow the ship, her crew and her cargo to resume their voyage. After more than three months of negotiations we are pleased that an agreement was reached which has allowed the ship to leave the Suez Canal," the UK P&I Club said in a statement.

The traffic backlog took more than two weeks to clear, pushing up freight rates and delaying the shipments of many key commodities such as oil, refined products, LNG, iron ore, metals, consumer goods and chemicals.

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 SCA.

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 SCA.

Cargo delays

The ship is chartered by Taiwan-based Evergreen Shipping Corp. and is loaded at close to its full capacity of just over 20,000 TEU.

Maritime lawyers and insurance executives that S&P Global Platts spoke with all cautioned that it may take much longer for the cargo stacked up in thousands of containers on the ship to reach the intended recipients in Europe.

Under standard procedures, the amount, which is paid as claims, is divided among the ship owner, charterer and the "cargo interests" under a General Average or GA adjustment. The division is based on a mutually agreed ratio, worked out by GA administrating adjusters.

Cargo interests who have yet to provide a General Average (GA) security bond, should expedite it to avoid further delay in cargo release and delivery at the port of discharge, Evergreen said in a statement last month.

In case of container ships, the number of cargo receivers from a single ship can run into the tens of thousands and therefore the division of claims is a challenge.

Evergreen has directed the entities inquiring about the Ever Given's GA over multiple cargoes to the Charles Taylor company, one of the world's oldest GA administrating adjusters. Charles Taylor could not be immediately reached for comment.