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Refloat Efforts Suspended; U.S. Seeks to Help: Suez Update

(Bloomberg) — Supply Lines is a daily newsletter that tracks trade and supply chains disrupted by the pandemic. Sign up here, and subscribe to our Covid-19 podcast for the latest news and analysis.The blockage of the Suez Canal is wreaking havoc on global seaborne trade, raising the prospects of higher inflation with more ships ferrying cargoes and commodities forced to divert.A special dredger has been deployed to free the vessel that has been stuck in the key waterway for days. Natural gas prices have increased and food supply chains may be affected if the blockage persists. Mark Ma, owner of China-based Seabay International Freight Forwarding Ltd., which has 20 to 30 containers waiting to cross the blocked canal, said that if traffic doesn’t resume in a week, “it will be horrible.”Two additional tugs will arrive at the Suez Canal by Sunday to assist in the refloating of the ship, Bernhard Schulte Shipmanagement, technical manager for the vessel, said in a statement on Friday.Efforts to Dislodge Suez Canal Ship Said to Need at Least a WeekThe pile-up of ships is creating another setback for global supply chains already strained by the e-commerce boom linked to the pandemic. About 12% of global trade transits the canal that’s so strategic world powers have fought over it. On Friday, the Biden administration raised concerns about the impact on global energy markets.Key Highlights:Two more tugs will arrive at the Ever Given by Sunday, ship management company says in statementOil tanker diverts; several ships in Indian Ocean that were bound for Suez change courseFood supply chain faces risksThe containership could be carrying almost $1 billion of cargo, IHS saysWork to dislodge the ship will take until at least middle of next weekAlmost 300 vessels have queued up, compared with 238 on Thursday, according to Bloomberg dataWhy the Suez Canal is so important: QuickTakeQatar Airways Gets Air Freight Queries (6 a.m. London)Qatar Airways, one of the world’s largest cargo airlines, said shippers stuck in the canal were sending queries as a precautionary measure. The airline expects “to see firmer interest in the coming days if the situation remains the same,” a spokesperson for the company said in response to questions from Bloomberg.Timing Couldn’t be Worse, Moody’s SaysThe canal’s temporary closure might affect 10%-15% of world container throughput, Moody’s Investors Service estimated earlier this week. Under normal circumstances, the temporary delays in global supply chains would not be a “big issue,” it said. However, a global shortage in container capacity and low service reliability has made supply chains highly vulnerable to external shocks despite high consumer demand, its analysts said.“The timing of this event could not have been worse,” analysts including Daniel Harlid wrote in a March 25 report.Insurers May Be on Hook for Millions (12:42 a.m. London)There were potentially thousands of insurance policies taken out on the steel boxes stacked high on Ever Given. They could result in millions of dollars in payouts.The blockage is set to unleash a flood of claims by everyone affected, from those in the shipping industry to those in the commodities business. Read the story here.Refloat Efforts Suspended (11:25 p.m. London)The salvage team suspended the re-floating operation at midnight local time, according to Inchcape Shipping Services, a maritime services provider.The dredger will continue working and the next re-floating attempt will be made at 2 p.m. local time Saturday with the high tide.Ship’s Rear Isn’t ‘Fully Stuck’ (10:52 p.m. London)“We have done a full inspection, and the positive news is that the rear end of the ship isn’t fully stuck in the clay,” said Peter Berdowski, chief executive officer of Boskalis Westminster, the parent company of the elite salvage team.He spoke in an interview on the Nieuwsuur TV program in the Netherlands.“With the two big tugboats that are underway, combined with the dredging, we hope that will be sufficient to get the ship afloat somewhere next week,” he said.Tides are expected to swell Monday night and Tuesday night and into the early hours of Wednesday.If the ship isn’t refloated then, the salvage team will move to “plan B,” which will involve lifting containers off the vessel, he said.“We will start taking containers from the ship anyway this weekend.”Biden Says U.S. Looking to Help (10:22 p.m. London)The U.S. is looking into how it can help to unblock the canal, President Joe Biden said.“We have equipment and capacity that most countries don’t have. And we’re seeing what help we can be,” Biden said.Sea-Doo Maker Pivots to Planes (9 p.m. London)Sea-Doo maker BRP Inc. has parts from Asian suppliers stuck on vessels jammed in the blockage.The situation prompted the Canadian maker of recreational vehicles to shift to its backup plan: flying another batch of components from Asia to its North American plants.“It’s more expensive, but it’s better than stopping assembly lines,” BRP Chief Executive Officer Jose Boisjoli said Friday in a phone interview.Ever Given Was Refloated From Stern (8:42 p.m. London)The elite salvage team working with the Suez Canal Authority was able to float the vessel from its “stern/aft” and released the rudder at approximately 9 p.m. local time, according to Inchcape Shipping Services, a maritime services provider.Another effort will take place using the high tide, with the hope of refloating the vessel entirely.Canal Authority Says Tug Operations Restart (7:54 p.m. London)Pulling operations with tug boats to free the ship restarted after dredging operations were completed, the Suez Canal Authority said on its Facebook page.‘Perfect Storm’ Brewing for Italy’s Ports (7:07 p.m. London)Once the Suez blockage ends, the huge backlog of ships will create a traffic jam for ports on the Mediterranean.“When traffic will flow again, ships will flood Italian ports,” said Daniele Rossi, chief of Italian ports association (Assoporti). Operational difficulties will make that difficult to “cope” with, he said.“The perfect storm is coming.”About 40% of Italian imports and exports pass through the Suez Canal, according to Assoporti/SRM research on Italian maritime economy.Logjam Nears 300 Ships (6:16 p.m. London)About 293 ships ranging from livestock carriers to liquefied natural gas tankers are waiting to transit the clogged waterway, compared with 238 on Thursday, shipping data compiled by Bloomberg show.White House Sees Energy Impacts (5:17 p.m. London)The White House is concerned about the impact on global energy, said Press Secretary Jen Psaki, who added that the Biden administration is monitoring market conditions.“We do see some potential impacts on energy markets,” she told reporters at a briefing on Friday.Earlier, a spokesman for the White House National Security Council said the U.S. government had offered Egypt assistance removing the grounded ship, the Ever Given.Wind Turbine Projects Seen Delayed (4 p.m. London)Germany’s Enercon expects delays in wind turbine components from Europe to projects in Asia, according to a company spokesperson. The wind turbine maker also sees risks of congestion at ports, once the ships held up at the Suez Canal arrive at their destinations. Enercon is examining to what extent the problem will affect its supply chains.North Sea Crude Loading Delays Likely (3:28 p.m. London)At least seven supertankers are expected to load North Sea crude in April, with two or three of them likely to face delays due to the blockage in the Suez Canal, according to tanker fixture reports and ship tracking data compiled by Bloomberg.Tanker Shares Surge (3:10 p.m. London)With diversions starting to pop up, the shares of oil tanker companies surged. Frontline Ltd. rose as much as 11% in Oslo, the biggest intraday gain since September. Other owners were jumping too: Euronav NV climbed as much as 7%, while DHT Holdings Inc. was also up 7%, and International Seaways Inc. added as much as 6.4%. It comes as the prospect of ships taking the longer route around the southern tip of Africa raises the chances for higher earnings for ships.British Retailers Say Impact Manageable (3:21 p.m. London)Dixons Carphone Plc has a small number of containers on the grounded Ever Given vessel but “we don’t believe this will cause any meaningful disruption to our stock levels,” the company said in an emailed statement. While some U.K. grocers are reporting small quantities of stock stuck both on the Ever Given and some container ships behind it, the products are mostly general merchandise and clothing which is less time-sensitive as perishable food items.Tug Boats Get Ready to Try and Tow Ever Given (2.22 p.m. London)Tug boats are tying themselves up to the Ever Given in order to attempt to tow the container ship, according to Inchcape Shipping Services, a maritime services provider. Suez Canal Authority dredgers were earlier being used to clear away sand, the firm said.Multiple Ships in Indian Ocean Take Detour (1:58 p.m. London)Several ships in the Indian Ocean, initially bound for the Suez Canal, have changed course away from the waterway after it became blocked, according to vessel-tracking data compiled by Bloomberg. The vessels include container ships Ever Greet, HMM Stockholm and OOCL United Kingdom; vehicle carrier Morning Calm; and cargo ship Angelic.U.S.-Asia Naphtha Arbitrage Opens on Suez Canal Blockage: BNEF (9:55 a.m. New York)The U.S. Gulf Coast-to-East Asia naphtha arbitrage has opened as naphtha shipments from key exporters such as Russia and Algeria delayed by the blockage in the Suez Canal.Oil Tanker for North Sea Loading Delayed a Week (12:59 p.m. London)Supertanker Olympic Lady is expected to reach the North Sea for planned loading around April 26-30, roughly a week’s delay, amid the blockage at the Suez Canal, according to person familiar with the matter. The Very large Crude Carrier was originally set to have used the canal to reach the North Sea for loading around April 20-25.Oil Tanker Rates Rise (12:40 p.m. London)Freight rates have jumped 20% for large oil-product tankers known as LR2s traveling from the Mediterranean in mid-April, according to Torm A/S, one of the largest owners of oil-product tankers in the world.The market is reacting to uncertainty of the duration of the Suez Canal jam, it said. “We are giving several pricing options to go via South Africa,” the company said.A handful of Torm vessels are scheduled to pass through the Suez Canal, and it is talks with customers about whether to divert them.Economists Predict Inflation Pressure (12:19 p.m. London)The blockage adds to supply-chain disruptions that have already cost world trade more than $200 billion since the start of the year, according to Allianz SE calculations. Every week the Suez Canal remains closed adds as much as $10 billion to the bill.Economists predict higher prices as a result.“I’m relatively sanguine about the additional hit to trade,” said Joanna Konings, senior economist at ING. But “with everyone’s tolerance for absorbing higher shipping costs run down, we might see some pass through from this episode. It’s an inflationary shock that could come right to the consumer.”Oil Tanker Diverts, May Be First to Do So (11:50 a.m. London)The oil tanker Marlin Santorini, a 1 million-barrel capacity Suezmax, switched destinations away from the Suez Canal, according to tanker tracking data compiled by Bloomberg.The vessel had been sailing east in the Atlantic Ocean toward the Mediterranean Sea, signaling Port Said at the northern end of the canal. It then turned south and looks to be heading around Africa.Two shipbrokers said they’d seen no other oil tanker diversions to avoid the Suez since the blockage, although multiple other vessel types, including LNG carriers and container ships, have done so.Food Supply Chain Faces Risk (11:44 a.m. London)The Suez blockage may mean limited availability of food, supply delays and higher prices at a time when economies and households are already grappling with rising food inflation and disruptions from Covid-19.Wealthy but food-deficit Gulf states and food aid-dependent Horn of Africa nations are particularly vulnerable to disturbances to grain flows. The canal handles at least 15% of global rice and wheat exports, according to research from Chatham House.“If it’s a delay of a month or longer it will put on a significant price pressure and reduce availability in some places,” Tim Benton, research director in emerging risks at Chatham House in London and a food security expert, said in an interview. “There are lots of compounding issues. The global food system is already under pressure from Covid. And clearly anything that adds a further straw to the camel’s back makes things bad.”Japan’s Oil Supply Won’t be Affected (11:40 a.m. London)The Suez canal blockage won’t immediately impact Japan’s crude supplies, Finance Minister Taro Aso told reporters in Tokyo.“Unlike in the past, Japan currently has enough of an oil stockpile for around 200 days, so I don’t think this issue will immediately impact Japan’s oil supplies,” Aso said.Russian Wheat Flows Largely Unaffected (11:35 a.m. London)The blockage isn’t causing major problems for Russian grain exports because sales of wheat from the world’s top shipper are currently low, said Eduard Zernin, chairman of the Russian Union of Grain Exporters. There’s no sign yet of any significant Russian sales being caught up in the queue, he said.Elsewhere in the Black Sea region, Ukraine’s deputy economy minister and the head of the country’s grain group, which includes the top shippers, said they don’t see any threats to the nation’s exports if the situation is resolved soon.Europe Natural Gas Prices Rise (11:15 a.m. London)The prospect of the container vessel blocking the Suez Canal for up to a week boosted European natural gas prices as cargoes laden with fuel destined for the region face severe delays. The blockage may create a supply gap that could be filled by pipeline gas from Russia or U.S. LNG. Benchmark Dutch and U.K. gas for next month both jumped on Friday.Three tankers near the canal’s entry will struggle to deliver LNG from Qatar for scheduled arrivals in early April. Vessels that are already waiting are unlikely to turn around at this stage, said Fauziah Marzuki, an analyst at BloombergNEF.Dredger Deployed in Effort to Refloat Ship (10:35 p.m. London)A specialized dredger has been deployed in efforts to dislodge the stuck ship. The Mashhour has completed 87% of its targeted work of that’s removing sand surrounding the vessel, displacing 17,000 cubic meters of material per hour. It started operations 100 meters from the stuck ship on Thursday and can get as close as 10 meters.The Ever Given will start to be pulled once the dredging operations are completed.Ever Given Owner Plans to Float Vessel Saturday (10:19 a.m. LondonJapan’s Shoei Kisen Kaisha Ltd., which owns the stricken Ever Given, aims to refloat the ship Saturday night Tokyo time, according to a company spokeswoman. Attempts to free the ship with 10 tugboats have failed so far, and the company plans to use two additional ships to help with the effort, the Nikkei reported, citing company officials at a briefing.The company said earlier this week that it was working with local authorities and ship manager Bernhard Schulte Shipmanagement to refloat the vessel but the situation is “extremely difficult.”Ikea Supply Chain May be Affected (10:13 a.m. London)Swedish furniture giant Ikea has confirmed there are containers with its products on ships that are waiting to make passage via the Suez Canal.“Depending on how this work proceeds and how long it takes to finish the operation, it may create constraints on our supply chain,” a spokesman for Inter Ikea Systems, the franchisor of the Ikea brand, told Bloomberg.Ikea said it’s now considering all supply options to help secure the availability of its products.Ever Given Could Have Almost $1 Billion Cargo, IHS Says (9:20 a.m. London)The total cargo value of a containership the size of the Ever Given is almost $1 billion, considering average value of products in an ocean container of about $40,000, according to IHS Markit.In the seven days since the Ever Given ran aground on Tuesday, 49 container ships carrying an estimated 400,000 TEU were set to pass through the Suez Canal in both directions, the consultant said.About 51 million container tons normally pass through the Suez every month, according to a Bernstein report Friday. With passage blocked, the volume of stuck containers would amount to over 200,000 18-ton trucks worth, the equivalent of a traffic jam from Chicago to El Paso. Adding in tankers and other ships, that jam would double, they wrote.Once the backlog starts clearing, it will overwhelm terminals in Europe, which are experiencing labor shortages because of Covid-19, said Greg Knowler, senior European editor at JOC by IHS Markit.“Rotterdam and Antwerp expect ship wait times to lengthen, and expect it will take longer to handle ships and clear containers from the yards, and businesses will have to wait longer for their imports,” Knowler said.Refloat Efforts Resume, Inchcape Says (6:00 a.m. London)Operations to refloat the Ever Given using tugs and dredgers resumed at 7am local time, according to Inchcape, a maritime services provider.At Least 12 U.S. Grain Shipments Impacted (2:48 p.m. HK)The congestion in the Suez Canal may delay nearly 7% of seaborne U.S. major grain shipments, according to USDA and vessel data analyzed by Bloomberg.Since the Bellatrix left Zen-Noh’s grain export elevator on the Mississippi River in late February, just 12 of 184 bulk carriers and general cargo ships have opted to take the Suez route, as many vessels take the Panama Canal and the route around South Africa to access Asia.More than 80% of the impacted grain shipments are corn, with close to 60% of them on six vessels headed to China. At least one ship, the Ledra, hauling corn to Vietnam, recently diverted toward the route around South Africa.HMM-Chartered Ship Diverts Around Africa (2:47 p.m. HK)The Hyundai Prestige container ship is detouring around the Cape of Good Hope to avoid gridlock in the Suez Canal, the vessel’s South Korean charterer HMM Co. said.The ship departed from Southampton, U.K., on Monday and has been told to go around Africa, a spokesman for HMM said. The vessel isn’t part of a scheduled service after its temporary deployment in January to help South Korea exporters, and is scheduled to reach Thailand’s Laem Chabang by late April.Cheap LNG Shipping Rates Ease Detour Pain (12:37 p.m. HK)Liquefied natural gas suppliers are beginning to send shipments around Africa, a journey that takes more time but — given current charter rates — isn’t that costly. Unlike oil tanker rates, prices for shipping LNG have remained subdued amid the crisis in Suez. A shift to milder temperatures in Europe and Asia has reduced gas demand, also curbing needs for tankers that ferry the fuel.At least seven LNG vessels have diverted away from their intended paths through the Suez Canal due to its continued blockage, according to Kpler analyst Rebecca Chia. At least two shipments from the U.S. headed to Asia have changed course in the Atlantic toward South Africa, according to Bloomberg ship-tracking data.Seabay Owner Says Week’s Delay Will Be ‘Horrible’ (12:23 p.m. HK)Mark Ma, owner of Seabay International Freight Forwarding Ltd., a company in Shenzhen that handles Chinese goods sold on platforms such as Inc., said his company has 20 to 30 containers on the ships waiting to cross the blocked canal.“If it can’t be resumed in a week, it will be horrible,” said Ma. “We will see freight fares spike again. The products are delayed, containers can’t return to China and we can’t deliver more goods.”Detouring ships doesn’t seem like a viable option at the moment, due to risks of taking unfamiliar routes, limited supply to the crew and an extended shipment time. “What if the canal got cleared in 8-10 days? You lose even more time,” said Ma.Crisis Isn’t Deterring Orders for Mega Ships (12:08 p.m. HK)The container ship blocking the Suez Canal has done little to deter shipping companies from ordering similarly mega-sized vessels. Korea Shipbuilding & Offshore Engineering Co.and Samsung Heavy Industries Co. — two of the world’s three biggest shipbuilders — announced they’d won orders worth a combined 3.45 trillion won ($3 billion) on Friday to build 25 container vessels that are all longer than the Eiffel Tower.Orders for mega-big ships have been increasing since this year after the lines saw their profits jump in 2020.Backlog of Vessels Will Take Days to Clear (9:19 a.m. HK)Even if the Ever Given sails away immediately, there’s a backlog of about 200 vessels of all types that will take days to clear, leading to an ever-increasing pile-up, according to Arthur Richier, a senior freight analyst at Vortexa. That’s assuming an average transit of 50 vessels a day via the canal.Egyptian authorities appear to want to wait until Monday for a higher tide to try and tow the vessel away, indicating that the most realistic return to normal for vessel traffic will only happen in a minimum of 10 days, Richier said.Ships in Red Sea Seen Leaving if Crisis Lasts 2 Weeks (9:12 a.m. HK)Ships in the Red Sea will be rerouted only if there is an extended delay in unblocking the Suez Canal, according to Randy Giveans, senior vice president of equity research for energy maritime at Jefferies LLC.So far, only ships outside the Red Sea that were hoping to use the canal are rerouting around the Cape of Good Hope. For vessels already in the area, it would only make a difference if the canal outage was certain to be over two weeks, since that’s how much additional time they would need to get around the Cape.Heavy-Lift Helicopters May Be Needed to Unload Containers (8:50 a.m. HK)The failed attempts to move the Ever Given are increasing the odds that heavy-lift helicopters may be needed to unburden it of at least part of its load of 500 containers, according to Nick Sloane, the salvage master responsible for re-floating the Costa Concordia, which capsized off Italy in 2012.The so-called sky-crane helicopters, able to lift a load of 25,000 pounds, and Russian MI-26 helicopters would be the only ones able to perform the task. The challenge is to find these helicopters and transport them to the site.There aren’t many of those that are privately owned, said Keith Sailor, director of commercial operations at Aurora, Oregon-based Columbia Helicopters Inc., a company that operates a fleet of heavy-lift helicopters. “If you can’t find one in the region, you’d need to fly one over there in an Antonov cargo plane,” he said. That could take five to eight days.Canal Traffic Jam Has Doubled to 238 Ships (5:37 p.m. London)The number of ships waiting to enter the Suez Canal is growing as the waterway remains blocked.Data compiled by Bloomberg shows there were 238 vessels queued up Thursday, compared with 186 counted on Wednesday and around 100 at the start of the blockage.Not Much Room to Maneuver (3:39 p.m. London)It’s no wonder the stuck Ever Given in the Suez Canal is creating such a headache.The key trade route is narrow — less than 675 feet wide (205 meters) in some places — and can be difficult to navigate. Work to re-float the giant container ship — about a quarter mile long (400 meters) — and allow passage for oceangoing carriers hauling almost $10 billion of everything from commodities to consumer goods continued without success on Thursday in Egypt.The blockage highlights a major risk faced by the shipping industry as more and more vessels, which are getting bigger and bigger, transit maritime choke points including the Suez, Panama Canal and the Strait of Hormuz.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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