Are We Still Feeling The Effects Of The Suez Canal Blockage?
On the morning of March 23 2021, a 400-metre-long shipping tanker called the Ever Given wedged itself across the waterway of the Suez Canal in Egypt.
The chair of the Suez Canal Authority, Lieutenant-General Osama Rabie, blamed the incident on poor weather conditions.
While the ship took nine days to be released, over 400 vessels waited to enter the canal, with an estimated $9.6bn worth of cargo being disrupted for every day that the Ever Given took to wriggle free.
One month later, are the implications of this disaster still being felt across the globe?
Towards the start of April, only a couple of weeks after the Suez Canal blockage had been freed, Egyptian Authorities stated that the queue of hundreds of ships hoping to pass through the water channel had been cleared.
In spite of this, those waiting for their cargo aboard the Ever Given are still yet to receive it, as the ship continues to be held in a nearby lake while the ship’s owners and insurers negotiate with officials from the Suez Canal authority.
MAJOR PORT ISSUES
Major global ports are still struggling with the backlog of vessels, with some carriers skipping port calls in Europe to try and avoid congestion, which, in turn, contributes to container shortages in other parts of the world such as Asia.
For example, Rotterdam in the Netherlands was expecting 15 further ships last week to join the queue of 85 vessels already at the port. Subsequently, the shipping delay to get into this port is currently at one week, with wait-times in Shanghai similarly high. This is far greater than the median level of just over 2 days to get into a port last year.
OCEAN FREIGHT CAPACITY REDUCTION
The world’s largest shipping group, AP Moller-Maersk, has advised that the disruption and soaring prices caused as a result of the 9-day closure of the Suez will last for most of this year. The surge in demand for shipping containers, following on from bottlenecks in the supply chain has caused the shipping giant to almost double its profit guidance for 2021 from $4.3bn-$6.3bn up to $9bn-$11bn.
Senior Vice-President at freight forwarding agency Agility, Edward Aldrige, has said “The ripple effect of the Suez [incident] would be ships out of their normal pattern [of sailing], not calling where they should be calling, not picking up empties where they should pick them up. Essentially it means reduction in capacity – the supply and demand gap widens further in the short term.”
Difficulty in securing shipping containers has had a large impact on suppliers like Ge Lei, who owns one of China’s largest bicycle factories.
“I think it’s less to do with price, because even if I am willing to pay more, there is still no container” he said.
SUPPLY CHAIN SHIFT
Longer-term implications are likely to come in the form of a shift in the type of supply chains which companies rely on.
Maersk’s chief executive, Soren Skou, has said that companies are now more likely to move away from just-in-time supply chains towards an option which enables them to keep a far higher inventory of goods in-country.
Brian Alster, General Manager of third-party risk and compliance at Dun & Bradstreet, demonstrated agreement on this point, adding the importance of data to overcome shipping issues which are currently experienced.
“Companies have developed a higher level of dependency on suppliers and third parties from other countries, and that dependency is highlighted when a link in the supply chain is impacted,” he said.
Alster continued by saying “The Suez Canal incident gives us yet another reason for businesses to invest in data and technology to create an agile, geographically dispersed supply chain that can quickly pivot during unexpected events; without data and insights, companies are blind.”
When will these issues end?
The last time the Suez Canal was blocked was in 2017, when the beached vessel was successfully dislodged in just a few hours. As such, it is hard to predict exactly how long it might be until shipping patterns return to normality.
The Port of Antwerp have said the blockage is expected to result in delayed ship calls and general operational challenges “throughout Q2”. However, shipping giant Maersk predicts that the effects will last even longer, into Q3 this year.