The Evergreen Marine-operated cargo ship that is lodged in the middle of Suez Canal is tying up more than $9 billion in goods -- everything from automobiles to oil -- and costs could soar even higher if it is not rescued by this weekend.
The ship, which is bigger than the Empire State Building, is costing $9.6 billion a day according to Lloyd's List, which has been tracking shipping news since 1734. That number could worsen after this weekend when the canal's tides will decrease for several days making it harder to refloat the cargo ship which has now been stuck for three straight days.
The closed waterway has some 150 ships back-ed up. Other vessels have changed course for southern Africa and the Cape of Good Hope -- a less direct route that could add two weeks to a ship's travels. While a solution in the short term until the Evergreen is freed, the shipping snafu comes at a time when the coronavirus pandemic is already causing a surge in demand for consumer goods, according to Lloyd’s List.
The volatility in crude prices has ramped up over the past 24 hours with West Texas Intermediate Crude closing down 4.28% to $58.56 on Thursday, after spiking above $60 per barrel on Wednesday.
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Phil Flynn, senior energy analyst at The PRICE Futures Group, and a FOX Business contributor notes the timing of the Suez snafu is not great.
"The delays in oil shipment come at a critical time for the U.S. energy industry that is counting on oil and gasoline supplies to replace lost barrels that were incurred during the recent Texas power outages. U.S. gasoline supplies have fallen in recent weeks as U.S. demand is rising. U.S. refiners really need to increase production as the summer driving season is just around the corner" he wrote.
Lloyd’s List also notes more than 50 vessels travel through the 300-foot-wide, man-made waterway every day, transporting 1.9 million barrels of oil daily and 1.2 billion pounds of cargo annually.
|UNG||UNITED STATES NATURAL GAS FUND LP UNIT (POST REV SPLIT)||16.27||+1.07||+7.04%|
The canal is one of the most strategic routes for Persian Gulf oil and natural gas shipments to Europe and North America. Along with the Sumed Pipeline, the Suez Canal accounts for 9% of the world’s seaborne oil trade according to EIA data.
In addition, the Suez canal is a key route for transporting furniture, clothes and supermarket basics from China. Not only will deliveries be delayed, but the jam also prevents the return of empty containers back to Asia, exacerbating a container shortage caused by the pandemic’s disruptions to shipping.
Companies including Costco have disclosed product shortages related to the container crisis.
“It’s almost like a ketchup bottle,” Lars Jensen, chief executive of SeaIntelligence Consulting told the Associated Press. “The longer this lasts, the higher risk that we are going to see major congestion problems in the European ports.”
While Evergreen Marine is the operator of the ship, it is owned by Japan's Shoei Kisen Kaisha Ltd., a ship leasing business. On Thursday, the company offered a written apology for the incident.
"We are determined to keep on working hard to resolve this situation as soon as possible," the company said. "We would like to apologize to all parties affected by this incident, including the ships traveling and planning to travel through Suez Canal."
The ship's operator and Egyptian officials have blamed the incident on winds gusting as much as 50 kilometers per hour (30 miles per hour), along with a sandstorm sweeping the area.
Officials said it could take "weeks" to refloat the ship and move it out of the way.
FOX Business' Phil Flynn, Audrey Conklin, and the Associated Press contributed to this report.