Brexit: of diggers, straws and camels

By Richard North - March 26, 2021

If not the most important news at the moment, it is certainly pretty close: the grounding of the Ever Given in the Suez Canal since Tuesday. At an estimated cost of £6.6 billion a day, causing major disruptions to the supply chain and fears of oil shortages, this has the makings of yet another economic crisis, to add to those we already have, occasioned by Covid and Brexit.

I actually remember both of the more serious disruptions related to the Canal, the first in 1956 when I was just old enough to perceive that something was wrong as we witnessed huge queues of cars outside the garage as I was being walked to school.

In 1973, in the wake of the Yom Kippur war, when the OPEC members proclaimed an oil embargo, the Canal having been closed since the 1967 Six-Day War, I found myself in one of those queues.

With my faithful 1966 Hillman Imp, I spent hours trying to get a tank of petrol so I could do my work as a newly-qualified environmental health officer. For the very last time, I was able to fill the six-gallon tank for the princely sum of £2.00 – 33.3p per gallon – a price we were never to see again.

Now, even though we’re facing disruption that could run to weeks rather than just a few days, the legacy media seems hardly concerned. Only the Daily Star is running the story on the front page, picturing the diminutive excavator helping to free the ship, with the jokey headline: “We’re gonna need a bigger digger”.

For the rest of the national media, the story is well down the running order, with nothing much they care to report after another attempt, early on Thursday, to free the vessel, producing nothing by way of a usable photo-opportunity which might have secured more prominent headlines.

Now we wait for salvage experts from the Netherlands and Japan to attend the scene and draw up plans to extricate the 400-metre container ship, weighing-in at 224,000 tons, more than three times the displacement of the UK’s new Queen Elizabeth-class aircraft carriers.

With the bulbous bow of the Ever Given impaled in the Canal bank, pictures of the ship’s water line show that the bow has risen up – which must be placing the rest of the hull under incredible stress. There is talk, therefore, of having to offload a substantial number of containers, plus fuel and ballast water, before the risky process of extricating the ship can begin.

Mishandled, there is a risk that the ship could break her back and sink, turning a recovery into a major salvage operation, on scale which has never before been attempted in such a confined space.

Shore-based cranes would have a limited reach, and there is no easy road access to the site, so it is likely that there will have to be ship-to-ship transfers. Unloading would have to be very carefully managed, to avoid differential stresses on the hull which could catastrophically damage a hull which could already be seriously weakened.

As it is, there are very few crane ships readily available which can tackle the intricate task of offloading containers from an Ultra-Large Container Vessel (ULCV). With a capacity of more than 10,000 40ft containers, each of which can weight up to 37 tonnes when fully loaded, this in itself is a Herculean task.

To obtain the type of heavy-lift ships which would be needed to salvage a wreck would take even longer. Probably, a wreck would have to be approached from both ends of the canal, requiring several ships. But the existing channel would have to be cleared of ships in order to gain access.

Given the scale of the potential operation, it would be as well to remember the Costa Concordia disaster. This 114,000 ton ship foundered on 13 January 2012, and it took two years before the wreck was finally towed away to the port of Genoa for scrapping. The Ever Given is nearly twice the displacement.

It is premature at this stage to suggest that the current situation could deteriorate to that extent, especially as the salvage operators have extremely strong reputations for dealing with difficult tasks. But the risks involved will undoubtedly suggest a cautious approach, which can only mean taking it slowly and carefully.

Interestingly, the Suez Canal channel was only widened in 2015 sufficiently to allow ships the size of the Ever Given passage, so the Canal operators are facing a truly unique situation.

However, if this is the first incident on such a scale to occur, it may not be the last. Already, the circumstances which caused the incident, where 30 mph winds appear to have made the ship uncontrollable, raise questions as to whether it is even safe to allow such giant vessels free passage.

Writing for the Guardian, though, Rose George explores the darker side of the shipping boom which supplies European consumers with so many of their needs at affordable prices.

She points to how, in the pursuit of “efficiency” and cost-cutting, ships such as the Ever Given are effectively under-manned, with smaller crews working ever-larger ships, the continual fatigue leaving them prone to making serious errors.

Addressing the political issues involved, therefore, this incident raises serious questions about the Johnson administration’s “tilt” to the Indo-Pacific. Reliance on an extended supply chain, over several thousand miles, is plausible for only as long as the shipping routes are secure. The Ever Given incident graphically illustrates how fragile they are.

There are, of course, alternatives, with the recently commissioned China-Europe rail line handling record-breaking volumes. But, while faster than ships, shipping is more expensive and congestion is setting an upper limit on the amount of goods which can be handled.

That leaves the possibility of air freight but that also has limited application: shipping rates are much higher, especially for bulk cargoes. There are, in any event, capacity limitations as the restriction on passenger flights, as a result of Covid, has had a knock-on effect in reducing belly cargo availability.

For the moment, as long as the Canal is blocked, shipping has the alternative of using the longer Cape route which adds about a week to the journey time, and substantial extra costs.

A less obvious problem is that longer transit times increase the stock of shipping containers required to keep goods moving. And therein lies another tale. For many months now, there has been a worldwide container shortage. Primarily (but not exclusively) caused by the pandemic, this has had a cascading effect along all supply chains, fundamentally disrupting international trade.

The lack of containers in the right locations during the recovery phase had a massive impact on rates. Market participants declare that transportation cost has increased from about $1,500 to $6,000-$9,000 per container in February this year. The container shortage also drives up new container prices, as manufacturers know the demand to charge extra.

Chinese container manufacturers, which dominate the market, are now charging $2,500 for a new container, up from $1,600 last year. In the previous six months, container rental rates have grown by about 50 percent as well.

One of the contributing factors is port congestion, particularly affecting Felixstowe in the UK, but spreading elsewhere, slowing down the return of empty containers to China, creating a monstrous imbalance.

The Ever Given incident can only exacerbate this problem, with as many as 150 ships caught by the blockage. The longer it continues, the greater the challenge will become, leaving us months if not weeks from a major crisis, and the prospect of severe commodity shortages.

Already, there are reports of a burgeoning toilet paper shortage in America, but what happens there could follow here.

What is currently inviting jokey headlines, therefore – and an outbreak of studied indifference – could end up being the straw which breaks the camel’s back. Brexit and Covid have stressed the system. It remains to be seen whether it can take a further shock.