The blockage of the Suez Canal by a large container ship earlier this week has so far had minimal impact on steel and raw materials trade. But there could be disruption if the vessel takes longer to re-float, Middle Eastern sources tell Kallanish.
Various Gulf Cooperation Council billet buyers say they have so far felt no impact on supply from, for example, the CIS that is transported south through the Suez Canal. One major United Arab Emirates-based buyer says its last lot purchased is already alongside at port. One major Saudi Arabian steelmaker meanwhile says its raw materials imports remain unaffected and it hopes the situation will normalise quickly.
Ship owners could however take advantage of the situation and push up freight rates, which are already at historic highs due to container shortages. This has made some intercontinental steel trade unworkable. The Baltic Dry Index, on the other hand, fell on Wednesday after the news of the Suez Canal situation.
One GCC-based mill says that although feedstock can be sourced locally, avoiding the Suez Canal blockage, steel exports in container to destinations such as Africa have been made unworkable. This is due to costly freight and container shortages. Last month a GCC coil processor also said skyrocketing container freight rates were making its export business difficult.
The jury remains out on how long the blockage will last. In 2017 a Japanese container ship that ran aground was re-floated within hours. At press deadline on Thursday the Suez Canal Authority was still working on re-floating the vessel and navigation through the Suez Canal was suspended. 13 north-bound vessels have dropped anchor in the Bitter Lakes waiting area until navigation can be resumed.
The authority’s crisis management committee held a meeting on Thursday with Dutch salvage firm SMIT to discuss ways to re-float the ship. It was decided to carry out dredging works around the ship’s perimeter.
Adam Smith Germany