Some ships are even told to turn back and offload cargo at nearby ports.
One of the largest shipping lines in the world, Mediterranean Shipping Company (MSC) has decided to reroute 11 of its container ships around the southern tip of Africa. This includes Conti Cortesia, which had made port calls at Nhava Sheva and Mundra in India last week.
“MSC expects this incident to have a very significant impact on the movement of containerized goods, disrupting supply chains beyond the existing challenges posed by the Covid-19 pandemic,” the company said in a customer advisory note.
MSC also asked two of its vessels, including MSC Stella that had made calls at Mundra and Hazira ports earlier this month, to turn back. The container ship will discharge its cargo at King Abdullah Port in Saudi Arabia and return to India, MSC said.
It is unclear at this point who will pay the demurrage charges for the offloaded cargo.
“There will be port charges for the cargo which is offloaded at these ports,” said Ramkumar Govindarajan, chief executive officer of Wiz Freight, a digital freight forwarding company. “It will be the shipping line’s call whether they will bill it to the customers or waive it off. That is something we are still discussing.”
Hyundai Merchant Marine (HMM) and Evergreen Marine Corp, among others, too have started rerouting their ships.
The latter operates Ever Given, the vessel that is wedged between the banks of the Suez Canal.
Shipping lines are not charging their clients extra for taking the longer route around Africa for the ships which have already sailed, industry insiders told ET. However, if this continues, freight charges which have already been high for the past few months will rise further.
MSC in its note said there will be some missed sailings as a result of this incident and the company may reduce the volumes of bookings it will accept according to the reduced capacity available.
Other shipping companies have given similar outlooks. This will lead to a capacity shortage and, subsequently, price hikes, experts said.
“Even if the Suez Canal opens in a short span of time, the dominoes have been toppled,” said Lars Jensen, CEO of SeaIntelligence Consulting, an advisory specialised in container shipping industry.
“The delays and rerouting which has already happened will cause ripple effects on both vessels and empty equipment which will be felt for several months, not to mention the predictable congestion issues in especially Europe when the canal reopens and a rush of cargo comes into the ports at the same point in time,” he said in a social media post.
Shipping companies are yet to announce their price charts for the first week of April in India as they assess the situation. Ideally, the rates should have been made available earlier this week.
Reports suggest that more than 300 ships are stuck on either side of Suez Canal.
A social media video showed that tugboats have managed to slightly move Ever Given.