On March 21, a container ship blocked the Suez Canal, one of the most important trading routes in the world. However, the economic impact to the South Korean economy was not as severe as initially feared after the ship was freed six days later.
The Ever Given, a 200,000 metric ton ship operated by Evergreen Marine, was heading to Rotterdam, Netherlands, via the canal to the Mediterranean. However, the ship, 400m long and 59m wide, was stuck sideways across the waterway due to unidentified reasons.
More than 400 vessels were left waiting at either end of the canal. After six and a half days, Ever Given was freed and traffic resumed.
Every day, about 50 vessels pass this canal. The goods delivered via this canal account for 10 to 12 percent of the global trade. As container ships that pass this canal carry natural resources, such as oil and liquified gas, from the Middle East to Europe, there are concerns of severe disruptions to the supply chain.
Impact was less severe than expected
The Suez incident’s impact was less severe than what some media outlets and experts expected it to be — “a disaster to the global economy,” MH Youn, chairman of the Korea Maritime Forum and an expert of the shipping industry, told Maritime Fairtrade.
There indeed was some disruption to the supply chains of natural resources and other goods. A report from Allianz Research said that the incident could have dented the global trade growth by 0.2 to 0.4 percentage point each week, delaying the transit time and causing congestion at ports of destination. But the delivery was quickly back on track after about a week.
For South Korean shipping companies, the situation was not much different. “Some of the manufacturing factories of South Korean companies are located in other neighboring countries, such as Taiwan, Philippines, and Vietnam,” Youn said. “From the Suez incident, there was some delay in delivering raw materials to those factories.”
However, Youn said that the overall impact the incident made on the South Korean economy was not significant.
“There were three South Korean vessels trapped in the canal. They had to take a detour to their destinations some days after the accident happened,” he explained. “The goods on these container ships were not delivered on time, but the impact of the delay on the overall economy is insignificant.”
Unexpected boom?
Shortly after the crisis was resolved, it is reported that South Korean shipbuilders would receive more orders from global clients over Japanese shipbuilders, as Ever Given was built by a Japanese company.
“This is a baseless claim, however,” Youn said.
“Shipowners place their orders based on economic factors, among others, with years of forward planning taking into account the market’s prospect in mind.
“Building a ship costs a significant amount of money and time. If they expect the economic situation to improve in, perhaps, a couple of years, they may take the risk to build a ship now.
“Therefore, I don’t think the Suez incident will factor into their shipbuilding decision.”
Blockage cause still not verified
In regards to the cause of the incident, Evergreen Marine, operator of the ship, said it suspects the ship was hit by a sand storm and “accidentally hit the bottom and run aground.”
Youn said that the exact cause of the incident will remain unidentified for a while.
“In incidents like these, usually the causes are broken engines, strong winds, and human errors but the cause of this particular incident may not be specifically known to the public.
“This is because it takes a very long time to investigate and the investigation will cost a huge amount of money. The expected benefit from finding the exact cause may not be able to compensate the cost.”
Although many suspected factors may have contributed to the incident, Youn thinks that human error is the likely main cause.
“First, I don’t think the storm that happened was strong enough [to run the ship aground],” he said.
“If it is engine problem, insurance companies currently investigating the cause would have noticed that immediately. Also, this type of cause can be easily identified from studying the voyage directory record of the ship.
“However, I wouldn’t say human error is the only cause of the incident. Multiple factors can be responsible for the incident.”
