Companies that have containers on the Ever Given could have to help pay the up to $1 billion Egyptian authorities are demanding before the ship leaves the Suez Canal

ever given suez canal
The Ever Given container ship in the Suez Canal on March 29, 2021.

  • The Suez Canal Authority said the Ever Given can’t leave until $1 billion in damages is paid.
  • The $1 billion would likely include paying for the tugboats and dredging ships that freed the ship.
  • The owner of the Ever Given declared “General Average,” so insurance could pay some of the damages.
  • See more stories on Insider’s business page.

Though three weeks have passed since the Ever Given first became stuck in the Suez Canal, the massive container ship is still anchored after Egyptian authorities announced $1 billion must be paid before it can leave.

“The vessel will remain here until investigations are complete and compensation is paid,” the head of the Suez Canal Authority, Lt. Gen. Osama Rabie, told a local news station.

But Rabie hasn’t publicly explained where the $1 billion estimate came from nor did he provide a breakdown of expenses from the incident.

An estimate of the damages that the $1 billion could include paying for:

  • Transit fees – Refinitiv, a London-based financial firm, estimated that Egypt lost $95 million in transit fees while the Ever Given blocked the Suez
  • Two dredger ships
  • 11 tug boats of varying size
  • Wages of 800 Egyptian workers that operated around the clock to free the ship
  • Damage to the canal
  • Other miscellaneous equipment used to free the ship, such as excavators

Abdulgani Serang, the general secretary-cum-treasurer of the National Union of Seafarers in India, likened Rabie’s $1 billion demand to a ransom and said the crew shouldn’t be held against their will while the ship is anchored and motionless.

“If the SCA has suffered losses, they can sort it out with those involved with the ship, but that cannot haul up seafarers in any manner,” Serang told the Times of India.

Serang told Insider that though they are not allowed to leave the ship, the crew are not imprisoned or on a form of house arrest.

“They are all onboard the ship and continuing with their work as required onboard,” Serang said. “Absolutely no cause to worry about their supplies, including their wages all being taken care of as per the union agreement like before the incident.”

The Ever Given’s newest challenge: insurance

Ever Given, Suez Canal
Container ship Ever Given stuck in the Suez Canal, Egypt on March 27, 2021.

Neither Egypt nor the Suez Canal Authority explained who could be responsible for the full $1 billion demand, but recent filings in London’s High Court suggest that the expenses could be split between the Evergreen, its insurers, and cargo owners on the boat.

The owners of the Ever Given filed a General Average claim in early April against Evergreen Marine Corp, the company leasing the ships. The suit included 15 other defendants who would likely be asked to chip in on the bill.

General average is a principle of maritime law that requires any of the ship’s customers to share the risk and costs involved if the ship faces a tragedy or failure.

“Evergreen Marine received a notice from the lawyer representing EVER GIVEN’s owner on the 1st April which specified that the owner had filed an Admiralty limitation claim at the High Court of Justice in the UK in accordance with the Merchant Shipping Act 1995, in view of the liabilities and compensation that may occur due to the grounding incident,” a spokesperson for Evergreen told Insider.

Declaring General Average would prevent Shoei-Kisen, the owner of the ship, and its insurance from paying the bulk of damages from the shipwreck but could lead to even longer waiting times for people to receive the goods still on the ship.

The British International Freight Association announced in a statement that if a company has containers aboard the ship, they will be asked for “an indemnity or deposit,” but noted that “any standard marine insurance policy” includes General Average losses. If a company did not insure the ship, however, then a cash deposit will be necessary to receive the containers.

If a company has cargo aboard the Ever Given without insurance and cannot pay the deposit, there is a possibility that the freight could be discarded, according to a release from the International Federation of Freight Forwarders Associations.

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2 experts explain why the company whose ship blocked the Suez Canal has seen its stock surge 28% since the incident started

Suez canal ever given
  • Evergreen Marine Corporation has rallied 28% since its Ever Given ship got stuck in the Suez Canal.
  • We spoke with two analysts who said its not unusual for freight tanker stocks to see bouts of volatility.
  • Freight tanker stocks are heavily tied to shipping rates, which have skyrocketed this year.
  • However, the canal blockage exacerbated supply and demand conditions and pushed rates higher.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

The stock price of the Taiwanese transportation company whose ship blocked the Suez Canal has soared ever since the incident that upended global trade began.

Shares of Evergreen Marine Corporation have gained 28% since March 23, the day the Ever Given ship got stuck in the Suez Canal and triggered an epic traffic jam of more than 400 ships.

Evergreen’s stock has been climbing since last summer, but saw a significant spike after the canal blockage. On the day the Ever Given got stuck, Evergreen tumbled 8% and closed at 42.75 New Taiwan dollars (NT$). Since then, it’s rallied to NT$55-the highest price in over a year-bringing Evergreen’s yearly gain to 440%.

It’s not out of the ordinary for ocean freight tanker stocks to experience volatility, as they’re heavily tied to shipping rates which tend to swing around, said Adam Scheiner, an analyst at UBS Global Wealth Management.

But shipping rates have been steadily rising as the world emerges from the pandemic, and the canal blockage only exacerbated port congestion and demand for shipping.

“The blockage in the Suez Canal just poured gasoline on this demand and price fire,” Scheiner told Insider.

Peter McNally, Third Bridge’s global sector lead for industrials, materials, and energy, told Insider that container shipping rates are up four times since the start of last year.

“This was the state of play before the Ever Given snarled global shipping traffic,” he explained.

A shortage of containers and difficulties dealing with the logistics of getting vessels in use back to Asia drove shipping rates higher throughout the year, McNally said. Additionally, the pandemic slowed air traffic and more companies turned to marine shipping to transport freight, he said.

High shipping rates will bode well for freight transportation companies, but Evergreen may be coming under pressure soon for its role in the global trade chaos.

The company could be facing a fine as large as $1 billion, though Evergreen’s president said the shipping giant is “free of responsibility from cargo delays” because “it will be covered by insurance,” according to Bloomberg.

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The Ever Given’s crew is safe, still onboard, and is getting paid while the ship’s being investigated

Ever given
The “Ever Given” container ship operated by the Evergreen Marine Corporation, sails through the Suez Canal, after it was fully freed and floated.

  • Egyptian authorities are investigating the Ever Given after it blocked the Suez Canal for six days.
  • The National Union of Seafarers of India’s general secretary is hopeful the crew will be absolved.
  • The union’s general secretary said the crew will continue to be paid as the inquiry continues.
  • See more stories on Insider’s business page.

The 25-person Indian crew of the Ever Given is stressed and tense, but is doing well as the massive container ship faces investigations after blocking the Suez Canal.

Abdulgani Serang, the general secretary of the National Union of Seafarers of India, gave Insider an update on their wellbeing on Friday.

The Egyptian government launched an inquiry into the event to uncover what went wrong after the ship became wedged in the canal and upended global trade. Investigators questioned the Ever Given’s crew on Wednesday, Suez Canal Authority Chairman Osama Rabie told local outlets, according to Reuters.

“There is a clear danger that the crew will be made scapegoats,” a senior authority in the shipping industry told the Times of India. The publication also said the Ever Given’s crew could be placed under house arrest until the investigation is completed.

ever given suez canal
The Ever Given sits beached across the Suez Canal, blocking all traffic. The ship was re-floated on March 29.

Serang told Insider that the crew of the Ever Given is safe and awaiting the results of the investigation, and added that reports about the status of the crew have been blown out of proportion.

“We want the inquiry done so corrective measures can be taken in the future,” Serang told Insider, “but we don’t want to take a guess about house arrest. Let’s not jump the gun and just wait for the results of the inquiry.”

Despite the investigation, Serang told Insider he’s optimistic that the crewmembers won’t face consequences.

“We are hopeful that the inquiry will come out that the seafarers end up clean,” Serang said. “As of now, the reports are that it was purely a weather-related incident.”

The Ever Given was traveling faster than the speed limit of the Suez Canal before getting stuck, Bloomberg reported. Initial investigations suggested the ship became beached due to high winds and ruled out any mechanical or engine failures.

ever given great bitter lake
A radar image taken by the Sentinel-1 satellite shows the Great Bitter Lake on March 31. The Ever Given is the bright ship on the lake’s eastern side.

The union secretary also said the Ever Given’s crew will continue to get paid even as the ship waits inspection in the Great Bitter Lake to determine if it can continue to its port of call.

“Bernhard Schulte Shipmanagement is a company of repute,” Serang said, “and the company and union have an agreement in place. All the things will be taken care of and there is no cause to worry whatsoever.”

The owners of the Ever Given recently filed a lawsuit in the High Court of London, The Lawyer reported. According to a spokesperson for Evergreen Marine Corporation, the ship’s operators, the filing is in relation to the Merchant Shipping Act 1995 and relates to liability and compensation claims related to the beached ship.

The preemptive lawsuit was filed to limit the potential damages faced by the owners of the Ever Given and was not filed in retaliation against the ship’s crew, The Maritime Executive reported.

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Egypt added a second ship channel to part of the Suez Canal in 2015, but the Ever Given was beached on a separate section of the canal that wasn’t expanded

Suez shipping lanes
A new shipping lane was created in the Suez Canal in 2015, but the Ever Given beached itself in a spot that was not expanded.

  • In 2015, Egypt’s president commissioned an expansion to the Suez Canal that added an additional shipping channel.
  • The project was a success and added a new lane in the northern region of the canal.
  • The ship blocking the Suez, however, is in the southern region that was untouched by the expansion.
  • See more stories on Insider’s business page.

Despite creating a second parallel channel in the northern Suez Canal for easier transport of goods, the container ship currently blocking the canal is stuck in a channel untouched by the addition.

Egyptian President Abdel Fattah al-Sisi commissioned the expansion of the canal in 2015 to deepen the main waterway and a new 22-mile channel in the northern part of the Suez in an $8.5 billion infrastructure project.

On Tuesday, the “Ever Given” container ship was traveling north through the southern region of the Suez Canal when an unexpected dust storm threw the ship off course and beaching the vessel, completely preventing boats from passing through.

The global economy loses an estimated $400 million for every hour that the Ever Given blocks the Suez Canal, according to an estimate from Lloyd’s List. The ship has been stuck for over 72 hours, leading to at least $29 billion in losses so far.

IKEA, an international furniture company, said it has over 100 containers currently aboard the Ever Given and told CNN that the situation may “create constraints on our supply chain.”

Other goods and supplies that could be affected by the blockage include coffee, toilet paper, and seafood. The Suez Canal Authority said Saturday it hopes to float the ship soon.

The Ever Given is gigantic – the ship is longer than the Empire State Building is tall – and its size is quickly becoming more and more of an issue. Even after excavators are finished uncovering the bow of the ship from the concrete and sand that it’s lodged into, a bevy of tugboats will be needed to shift the ship from its position.

Experts have also suggested lightening the Ever Given via airlifting containers or crane, but the costs and challenges associated with the attempts may lead to different solutions. According to the BBC, if the weight distribution of the ship becomes too unbalanced from attempts to lighten it, it could even break in half.

White House Press Secretary Jen Psaki said on Friday that the Biden Administration offered US assistance. The US Navy also plans to send an assessment team of dredging experts to the canal, according to CNN.

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Ikea says it could have supply chain issues because of the Suez Canal blockage

IKEA
IKEA sign seen outside its showroom in Vitrolles, France.

  • Ikea has over 100 containers on the cargo ship stuck in the Suez Canal, a Swedish newspaper reported.
  • A spokesperson told CNN that if the ship isn’t floated soon, the company could have supply chain “constraints.”
  • The Suez blockage costs approximately $400 million per hour in delayed goods, according Lloyd’s List.
  • See more stories on Insider’s business page.

After a dust storm beached the Ever Given container ship and blocked the Suez Canal on Tuesday, international companies are speaking out about how they may be affected.

Ikea, a Swedish furniture company operating in at least 41 countries, currently has over 100 containers with products atop the beached ship, according to Swedish daily newspaper Svenska Dagbladet. If the blockage continues, the company said it could “create constraints on our supply chain,” according to a spokesperson on CNN.

Ikea is not the only international company facing headaches from the canal crisis: Caterpillar, a construction machinery company, is considering airlifting products if necessary to circumvent the ongoing blockage, according to Bloomberg.

Coffee, toilet paper, seafood and a host of other goods and supplies could also fall into short supply if the blockage drags on. The Suez Canal authority said Saturday it hopes to float the ship soon.

The Suez blockage costs approximately $400 million per hour in delayed goods, according to an estimate from Lloyd’s List. As of Saturday, the canal has been blocked for over 72 hours, costing companies approximately $29 billion.

With about 12% of global trade passing through it every year, the Suez Canal is one of the world’s most important and most-traveled shipping routes. The existence of the man-made canal allows for a much shorter passageway between the Mediterranean and Red seas: before the creation of the Suez Canal, ships were forced to travel 15,000 miles around the Cape of Good Hope in South Africa to reach Europe and its surrounding waters.

On Thursday, commodity experts said that the prospect of ships being forced to return to traveling around the tip of Africa is “unlikely” due to the shipping delays it would lead to, but that may change if the blockage lasts for weeks.

Evergreen, the company that leases the Ever Given ship, appears to have already diverted course on several of its ships in the previous days to take the long Africa-based route, despite the extra costs. The Wall Street Journal reported that the journey may add $450,000 in costs to the journey by adding weeks to the estimated travel time.

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