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Why Egypt seized cargo ship that blocked Suez Canal

Egyptian authorities have seized the container ship that blocked the Suez Canal last month in an effort to get over $900 million in compensation for the weeklong shutdown of the waterway.

Egypt seized the giant container vessel after a court in the city of Ismailia granted a seizure request regarding the Ever Given vessel at the behest of the Suez Canal Authority (SCA).

The pressure is now on Ever Given’s Japanese owner, Shoei Kisen Kaisha Ltd., to negotiate a settlement for damage to the canal and lost business while the stuck ship blocked a critical artery for global trade.

Osama Rabie, chairman of the Suez Canal Authority, told an Egyptian TV channel that it was demanding payment for the costs of the rescue operation, damages to the banks of the canal and lost revenues.

The court order for the seizure claimed the ship’s owners failed to pay $900 million, according to Egyptian state media.

Rabie said negotiations with the ship’s owner and insurers were taking longer than expected.

Speaking to Egypt’s Mehwar TV channel late Tuesday, Rabie said the owners and insurers “didn’t say when or what they’ll pay” and hadn’t mentioned specific figures.

“They don’t want to pay anything,” Rabie said of the Japanese owners. He has repeatedly denied responsibility on the part of Egypt for the accident.

He said seizing the Ever Given is a legal procedure and that the order would be lifted as soon as there’s payment.

The UK P&I Club, the ship’s insurer for third-party losses, said in a statement on Tuesday that the owner received a claim for $916 million.

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The insurer said the Suez Canal Authority had rejected its offer to settle the claim.

It described the claim, which includes $300m for a salvage bonus and $300m for loss of reputation, as “extraordinarily large” and “largely unsupported”.

The UK P&I Club said in the statement that the SCA didn’t include the salvager’s claim for its services, “which owners and their hull underwriters expect to receive separately”.

“Despite the magnitude of the claim, which was largely unsupported, the owners and their insurers have been negotiating in good faith with the SCA,” the insurer said.

“On 12 April, a carefully considered and generous offer was made to the SCA to settle their claim. We are disappointed by the SCA’s subsequent decision to arrest the vessel today,” it said.

And, contrary to claims that the Suez Canal ship backlog caused a sulphur pollution spike, it said “the grounding resulted in no pollution and no reported injuries”.

It expressed disappointment “at comments by the SCA that the ship will be held in Egypt until compensation is paid, and that her crew will be unable to leave the vessel during this time”.

On its part, the shipowner compared the move by Egyptian authorities to an arrest but said it would continue negotiations.

“They are still talking to us. So, we will continue negotiations on compensation,” said Ryu Murakoshi, a spokesman for the company. He declined to disclose the amount under discussion.

The Ever Given is anchored in the Great Bitter Lake, about halfway along the canal, with its 25 Indian crew members still on board the ship.

The 400m-long (1,312ft), 220,000-tonne ship became wedged diagonally across the waterway on March 23 after it ran aground amid high winds and a sandstorm that affected visibility.

Following a salvage operation involving a flotilla of powerful tug boats and dredging vessels that shifted an estimated 30,000 cubic metres (1.1m cubic ft) of mud and sand, the vessel was freed on March 29.

While the blockage lasted, over 400 vessels had to wait to pass through the 193km (120-mile) canal, which connects the Mediterranean Sea to the Red Sea and provides the shortest sea link between Asia and Europe.

Bernhard Schulte Shipmanagement, manager of the ship, said the American Bureau of Shipping has declared the Ever Given fit to sail after inspections and it plans to move it to Port Said at the north end of the canal and then to Rotterdam.

Ian Beveridge, its CEO, said in a statement that the company’s “primary goal is a swift resolution to this matter that will allow the vessel and crew to depart the Suez Canal”.

Meanwhile, logjams are expected to continue in the coming weeks at major ports such as Singapore and Rotterdam because of disruptions to schedules, Bloomberg reports, quoting supply-chain data provider project44.

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