Blocking the Suez canal costs $400 million per hour for global trade
Lloyd’s List estimates that each hour of delays in shipping goods in the Suez canal costs global trade about $400 million in revenue. Currently, more than 230 vessels have accumulated in a traffic jam due to a stranded container ship in the channel.
Shipping company Lloyd’s List estimates that blocking ships in the Suez canal by the stranded container ship Ever Given costs world trade $400 million per hour, CNBC reports. This amount is based on the value of goods that are moved by ships on the canal each day. According to Lloyd’s List, the cost of goods traveling in the Western direction per day is $5.1 billion, in the Eastern direction – $4.5 billion.
According to John gold, Vice President of supply chain and customs policy at the National Retail Federation, the lockdown has increased supply chain tensions. “Every day that a ship remains stuck in the channel adds delays to normal cargo flows,” gold said. He added that the Federation’s members are actively working with carriers to monitor the situation and determine the best mitigation strategies. “Many companies continue to struggle with supply chain congestion and delays caused by the pandemic. There is no doubt that delays will spread throughout the supply chain and cause additional problems, ” he said.
$160 million worth of Russian oil is stuck in a traffic jam in the Suez canal
About 12% of all world trade passes through the Suez Canal, which separates Africa from Asia. Energy exports, such as liquefied natural gas, crude oil, and refined petroleum, account for between 5% and 10% of global supplies. The rest of the channel’s traffic is mostly consumer goods. The key to this problem depends on how long it takes to move the stranded ship, said Alan Baer, President of logistics provider OL USA LLC. “American importers are now facing three-day arrival delays, and they will continue to increase until the disruption stops,” he added. Last year, global importers relied more on the Suez canal to avoid massive congestion at ports on the West coast of the United States. These traffic jams added days and weeks to some shipments from Asia. Baer, who has vessels stuck in both directions of the canal, said that if it remains closed, the fleet will have to be diverted to bypass the Horn of Africa, a Peninsula in Eastern Africa. This route, the source said, will add from seven to nine days of travel.
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According to BIMCO, the largest international shipping association representing shipowners, the impact of the Suez canal on shipments will only grow. “As we speak, everyone is making contingency plans,” said Peter Sand, a chief shipping analyst at BIMCO. “Carriers conduct one-third of their Asian trade flows to the U.S. East Coast via the Suez canal and two-thirds via the Panama canal. Disruptions also affect import trade from India, as well as from the Middle East, ” Baer said. According to the world shipping Council, the Suez canal has a daily capacity of 106 vessels. If the channel is closed for two days, it will take another two days to clear the backlog after it is reopened. The longer the delay, the longer it will take to get the ships out.
A stranded container ship has blocked traffic in the Suez canal.
The reliability of the container ship schedule has already been disrupted, and it itself is in disarray as a result of the pandemic, said Lars Jensen, CEO of Sea Intelligence Consulting. “Right now, two out of three container ships are late, and when they are late, they are on average five days late,” he said, adding that a two-day delay is not a major problem. “However, the longer it drags on, the worse it gets, because then you are talking about effectively removing the vessel’s capacity, as well as containers, at a time when they are already in short supply,” Jensen said. In addition to delaying thousands of containers loaded with consumer goods, the stranded ship also delayed empty containers that are key to Chinese exports. “China is already running low on containers, and a reserve of them in Suez will further increase the shortage,” said Jon Monroe, Maritime trade and logistics consultant at Jon Monroe Consulting. “We are back in the Chinese new year’s eve environment, where factories are working at full speed and struggling to find containers, as well as a place for their finished products,” he explained. “Prior to the Suez canal lockdown, we expected the container situation to worsen in April because we already saw a shortage of containers,” Monroe added.
About 100 ships were stranded in the Suez canal area due to a stranded container ship
Chinese manufacturers are responding to sharply increased orders for their products. Pandemic lockdowns have fueled consumer demand over the past year. As a result, the continuous flow of ships carrying millions of containers has caused port congestion and slowed cargo handling. Nike, Crocs, Gap, Peloton, Footlocker, Five Below, William Sonoma, Steve Madden, Whirlpool, Urban Outfitters, and Tesla cited supply chain issues affecting their business this quarter. SEKO Logistics growth Director Brian Burke said the Suez canal lockdown is creating a “perfect storm” for retailers struggling to restock. “The timing couldn’t be worse,” he said. The interlocutor explained that American consumers have received incentive payments, and enterprises are running out of stocks of finished products. “How can you have an incentive if you can’t buy anything? Your wait for your couch may last longer than three months, ” Burke lamented.
The owner of the ship that blocked the Suez canal has issued a public apology
The container crisis has been ongoing for several months and is caused by an imbalance in trade between producers in the Asia-Pacific region and South Asia and consumers in North America and the EU. China, whose economy is recovering from the pandemic, has an acute need for containers. But they have accumulated in our ports, where the population, which spends a lot of time at home due to restrictions, makes more and more orders for Chinese goods. In 2020, leads to Bloomberg estimates McKinsey & Co., the volume of purchases of goods by American households increased by $523 billion. “All cargo ships and vehicles were caught up in the massive flow of supplies across the Pacific,” said Ludwig Hausmann, partner at McKinsey’s Munich office.
The price of Brent rose by almost 6% due to the ship blocking the Suez canal
The fact that the container ship Ever Given ran aground in the Suez canal, blocking all ship traffic, became known on March 24. A representative of the Taiwanese company Evergreen Group, which manages the ship, said that it was probably hit by strong winds, “because of which the hull deviated from the channel and ran aground.” As a result of the incident, more than a hundred vessels were stuck in traffic. By Thursday, the number had exceeded 230, Bloomberg estimated.
Experts note that Ever Given is unlikely to be removed from the shoal before the beginning of next week, writes Bloomberg. In particular, Nicholas Sloan, senior master of the emergency rescue team that was engaged in lifting the Costa Concordia cruise ship in 2012, noted that the spring tide, which is expected in the Suez canal on Sunday or Monday, can help the situation. According to him, the water level in the canal will rise by 18 inches (46 cm), which will provide greater maneuverability.