Suez Canal blockage likely to impact India's trade, say analysts

The blocking of the Suez Canal because of the stranded Ever Given hasn’t been much of a worry for Indian shipping companies such as Great Eastern Shipping and Essar Shipping, but it is likely to impact Indian trade if the blockage continues beyond the weekend, say experts.
 
“We are not impacted directly as all our vessels are around India and in the South East Asia region. We need to, however, wait and watch the indirect impact as shortage of vessels is likely, which will in turn push up freight,” Ranjit Singh, executive director and chief executive officer of Essar Shipping, told Business Standard. Essar Shipping has a fleet of 12 vessels with a total capacity of 1.12 million DWT (deadweight tonnage).
 
Great Eastern Shipping is still evaluating the impact, said a source close to the development. “It has had more of an impact on the Suezmax sector, where rates are starting to rise and a lengthy blockage will more quickly affect vessel supply balances. Some vessels in this segment ballast northward through the Suez Canal, after completing voyages in the East, to lift cargoes from the Black Sea or the Mediterranean to go to Asia again, so a sustained canal disruption would have a significant impact on this voyage chain,” said Claire Grierson, senior director of tanker research at Simpson Spence Young (SSY).
 
However, Indian trade is expected to take a hit going ahead, said industry officials.
 
“Vessels that are calling in India will not be affected as much at least in the short term. However, owing to the giant backlog, vessels carrying Indian export cargo that are east to west bound, heading from Asia to Europe will face delays,” said Sanjay Bhatia, co-founder of Freightwalla.

 
“In case of importers, the majority [of cargo] comes from China and the Far-East, but a significant amount of high value cargo such as high tech machinery comes from Germany, Italy, USA and other Western countries that are also expected to be impacted with their deliveries getting delayed,” he added.
 
Some industry officials feel the trade shock can be absorbed if the issue is resolved by Sunday. “It’s not the peak season at present, nor is there any important festival anytime around. So it will not be difficult for trade to come back to normal if the issue is resolved in next few days,” said a former chairman of Shipping Corporation of India on condition of anonymity.
 
Officials are of the view that since vessels will have to take a longer route because of the blockage, it would take 60 days instead of the usual 30 days for some vessels, leading to increased fuel consumption. The vessels would have to go all the way down to the tip of the African continent and journey around the Cape of Good Hope.
 
“The Middle East Gulf clean tanker rates had already started to trend higher prior to the blockage and charterers are asking for voyage options with routing via the Cape of Good Hope and the Suez Canal. This could add as much as 20 days to a voyage from the Middle East Gulf to Rotterdam that would normally go via Suez,” said Grierson of SSY.
 
The impact on commodities extends beyond oil and gas, said industry experts.