The failed mega-container ship, Ever Date in the Suez Canal, has about $ 400 million an hour in trade, based on the approximate value of goods that are transported daily through Suez, according to shipping data and news company Lloyd’s List.
Lloyd’s estimates traffic west of the canal at about $ 5.1 billion a day, and traffic east of about $ 4.5 billion a day. The blockade further underscores an already tense supply chain, said Jon Gold, vice president for supply chain and customs policy for the National Retail Federation.
“Every day the ship remains surrounded by the canal, it adds delays to normal cargo flows,” he said, adding that members of the trade group 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 pandemic delays. There is no doubt that delays will pass through the supply chain and cause additional challenges.”
The Suez Canal, which separates Africa from Asia, is one of the busiest trade routes in the world, with about 12% of total global trade flowing through it. Energy exports, such as liquefied natural gas, crude oil and refined oil, account for 5% to 10% of global transport. The rest of the traffic is mostly consumer goods, from fires to clothing, furniture, production, car parts and exercise equipment.
“The key to this problem depends on how long it will take to move Ever Date,” said Alan Baer, president of logistics provider OL USA LLC. “US importers are facing arrival delays of three days right now and this will continue to grow as long as the disruption continues.”
the horn of Africa
Suez offered some relief to global importers as they relied more and more on it last year to avoid massive congestion in US West Coast ports that added days, if not weeks, to some deliveries. coming from Asia.
Baer, who has containers on ships stranded on both sides of the Suez Canal, said that if it remains closed, the ships will be diverted and surround the Horn of Africa, adding another seven to nine days to a voyage.
According to BIMCO, the largest of the international shipping associations representing shipowners, the blockade will continue to grow and have an impact on supply.
“Everyone is making contingency plans while we talk,” said Peter Sand, chief shipping analyst at BIMCO.
“Carriers drive a third of their trade routes from Asia to the US East Coast via the Suez and two-thirds through the Panama Canal,” Baer said. “The disruption also affects import trade from India and the Middle East.”
Deleting the arrears
According to the World Shipping Council, the daily transport capacity of the Suez Canal ship is 106. If the canal is closed for two days, it will then take two more days after reopening to eliminate the backlog. The longer the delay, the longer it will take to move the vessels.
Lars Jensen, CEO of Sea Intelligence Consulting, tells CNBC that the reliability of the container ship program is already in disarray due to the pandemic.
“Right now two out of three container ships arrive late,” he explained. “And when it’s late, it’s an average of five days,” he said, adding that a two-day delay is not a major problem. “However, the further this goes, the worse it gets, because you are talking about the efficient disposal of the ship’s capacity as well as the containers at a time when they are already in small quantities.”
The failed container ship Ever Date, one of the largest container ships in the world, is seen after it crashed in the Suez Canal, Egypt, March 25, 2021.
Suez Canal Authority Reuters
Inventory impact
In addition to the delay of thousands of containers loaded with consumer goods, the blocked ship also tied empty containers, which are the key to Chinese exports.
“Containers are already scarce in China, and Suez reserves will further increase inventory,” said Jon Monroe, a maritime and logistics consultant at Jon Monroe Consulting. “We have returned to a pre-Chinese New Year environment where factories operate to the fullest and strive to find containers as well as space for their finished products.”
This delay will have an impact on the arrival of imports from the US that fill store shelves, as well as US manufacturing components.
“Before the Suez Canal was disrupted, we expected the container situation to worsen in April, as we were already seeing a shortage of containers,” Monroe said. “This canal closure will not help. You will begin to see products piling up on the factory floors.”
Consumer demand
Chinese producers are responding to extraordinary global orders for their goods. Pandemic blockages have fueled consumer demand over the past year. As a result, a continuous historical flow of ships holding millions of containers clogs ports and slows down processing. The delays were costly.
Nike along with retailers Crocs, Gap, Peloton, Footlocker, Five Below, William Sonoma, Steve Madden, Whirlpool, Urban Outfitters and Tesla cited all supply chain issues affecting their business this quarter.
Brian Bourke, Chief Growth Officer of SEKO Logistics, told CNBC that the blockade creates the perfect storm for retailers struggling to recover.
“The timing of this could not be worse,” he said. “You have incentive checks that go into the hands of consumers. After each stimulus check, we saw a huge increase in the volume of products. We talk to companies that no longer have stocks. How can you have a stimulus if you can’t buy something? Your wait for the couch can last more than three months. “