The stranded mega container ship, once given in the Suez Canal, holds an estimated $ 400 million per hour in trade, based on the estimated value of goods shipped through the Suez every day, according to shipping data and news firm Lloyd’s List.
Lloyd’s values the channel’s westbound traffic at approximately $ 5.1 billion per day and eastbound traffic at approximately $ 4.5 billion per day. The blockade further highlights an already tense supply chain, said Jon Gold, vice president of supply chain and customs policy at the National Retail Federation.
“Any day the ship remains clamped across the channel delays normal cargo flows,” he said, adding that the members of the trade group are actively working with carriers to monitor the situation and determine the best risk mitigation strategies. “Many companies continue to face supply chain congestion and delays caused by the pandemic. There is no doubt that the delays will cut through the supply chain and create additional challenges.”
The Suez Canal, separating Africa from Asia, is one of the busiest trade routes in the world, with about 12% of total world trade passing through it. Energy exports such as liquefied natural gas, crude oil, and refined oil make up 5% to 10% of global supplies. The rest of the traffic is largely consumer products, ranging from fire pits to clothing, furniture, manufacturing, auto parts and fitness equipment.
“The key to this problem depends on how long it takes to move the Ever Given,” explains Alan Baer, director of logistics services provider, OL USA LLC. “US importers are currently facing a three-day delay on arrival and this will continue to grow as long as the disruption continues.”
Horn of Africa
The Suez has provided some relief for global importers as last year they increasingly relied on avoiding massive congestion at US West Coast ports, which would have caused some deliveries from Asia to take days or even weeks.
Baer, who has containers on ships trapped in both lanes of the Suez Canal, said if it remains closed, ships will be diverted and go around the Horn of Africa, adding an extra seven to nine days to a journey.
According to BIMCO, the largest of the international shipping associations representing shipowners, the bottleneck will only increase and affect supplies.
“Everyone is currently making contingency plans,” said Peter Sand, chief shipping analyst at BIMCO.
“Carriers carry one-third of their Asian trade strings to the US East Coast via the Suez and two-thirds via the Panama Canal,” Baer said. “Disruption is also affecting import trade from India and the Middle East.”
Clearing the backlog
According to the World Shipping Council, the daily throughput of the Suez Canal is 106. If the canal is closed for two days, it will take two more days after reopening to clear the backlog. The longer the delay, the longer it will take to leave the ships.
Lars Jensen, CEO of Sea Intelligence Consulting, tells CNBC that the reliability of the container ship timetable has already been disrupted due to the pandemic.
“At the moment, two out of three container ships are arriving late,” he explains. “And if 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 this runs out, the worse it gets, because you’re talking about effectively removing both drum capacity and containers at a time when they are already scarce.”
Stranded container ship Ever Given, one of the world’s largest container ships, is seen after it ran aground, in the Suez Canal, Egypt, on March 25, 2021.
Suez Canal Authority | Reuters
Stock impact
The stranded ship has not only delayed thousands of containers full of consumer goods, but also tied up empty containers, which are essential for China’s exports.
“Containers are already scarce in China and the backup in the Suez will further emphasize the inventory,” explains Jon Monroe, maritime trade and logistics consultant at Jon Monroe Consulting. “We are back in a pre-Chinese New Year environment where factories are running at full speed and struggling to find containers and space for their finished products.”
This slowdown will affect the arrival of US imports to fill store shelves as well as US manufacturing components.
“Before the disruption to the Suez Canal, we expected the container situation to deteriorate in April, as we were already seeing the scarcity of containers,” said Monroe. ‘This channel closure doesn’t help. You will see that the product piles up on factory floors. ‘
Consumer demand
Chinese manufacturers are responding to huge global orders for their goods. Pandemic lockdowns have fueled consumer demand over the past year. As a result, a continuous historical flow of ships with millions of containers clogs ports and slows down processing. The delays are costly.
Nike and retailers Crocs, Gap, Peloton, Footlocker, Five Below, William Sonoma, Steve Madden, Whirlpool, Urban Outfitters and Tesla all cited supply chain issues affecting their business this quarter.
Brian Bourke, SEKO Logistics Chief Growth Officer, tells CNBC that the blockage is creating the perfect storm for retailers struggling to replenish their inventory.
“The timing of this couldn’t be worse,” he said. “You have incentive checks in the hands of consumers. After every incentive check, we’ve seen a massive increase in product volume. We’re talking to companies that are running low on inventory. How can you get an incentive if you can’t buy something?” You wait on your couch can last longer than three months. “