The stranded mega-container ship Ever Given in the Suez Canal is trading an estimated $ 400 million an hour based on the approximate value of goods transported daily through the Suez List, according to shipping data and news company Lloyd’s.
Lloyd’s estimates traffic to the west of the Canal at around $ 5.1 billion per day and traffic to the east at around $ 4.5 billion per day. The blockade continues to underscore an already tight supply chain, said Jon Gold, vice president of supply chain and customs for the National Retail Federation.
“Every day the ship is jammed across the canal causes delays in normal freight flows,” he said, adding that members of the trading group are actively working with shippers to monitor the situation and determine the best mitigation strategies. “Many companies continue to experience problems with supply chain congestion and delays due to the pandemic. There is no doubt that the delays will permeate the supply chain and create additional challenges.”
The Suez Canal, which separates Africa from Asia, is one of the busiest trade routes in the world, carrying approximately 12% of all world trade. Energy exports such as liquefied natural gas, crude oil and refined oil account for 5% to 10% of global shipments. The rest of the traffic consists mostly of consumer goods, ranging from fire pits to clothing, furniture, manufacturing, auto parts to exercise equipment.
“The key to this problem depends on how long it will take for Ever Given to move,” said Alan Baer, president of logistics company OL USA LLC. “US importers are currently three days late in arriving and this will continue to increase as long as the disruption continues.”
Horn of Africa
Suez has brought some relief to global importers as they have increasingly relied on it over the past year to avoid massive congestion in US west coast ports that added days if not weeks to some shipments from Asia.
Baer, who has containers on ships stuck in both lanes of the Suez Canal, said if it stays closed the ships will be diverted and circulated around the Horn of Africa, adding an additional seven to nine days to a trip.
According to BIMCO, the largest international shipping association representing shipowners, the bottleneck will only increase and affect supplies.
“As we speak, everyone is making contingency plans,” said Peter Sand, BIMCO’s chief shipping analyst.
“Carriers carry a third of their trade routes in Asia via the Suez to the east coast of the US and two-thirds through the Panama Canal,” said Baer. “Disruptions also affect import trade from India and the Middle East.”
According to the World Shipping Council, the daily throughput capacity of the Suez Canal is 106. If the canal is closed for two days, it will take two more days to clear the backlog after it reopens. The longer the delay, the longer it will take for the ships to be deployed.
Lars Jensen, CEO of Sea Intelligence Consulting, tells CNBC that the reliability of the container ship schedule is already in disarray due to the pandemic.
“At the moment two out of three container ships are late,” he said. “And if they’re late, they’re an average of five days late,” he said, adding that a two-day delay isn’t a big problem. “The longer this goes on, the worse it gets because you are talking about effectively removing the ship’s capacity and the containers at a time when they are already scarce.”
The stranded container ship Ever Given, one of the largest container ships in the world, was seen aground in Egypt’s Suez Canal on March 25, 2021.
Suez Canal Authority | Reuters
Effects on the inventory
The stranded ship not only delayed thousands of containers loaded with consumer goods, it also tied up empty containers, which are vital to Chinese exports.
“Containers are already rare in China and securing them in Suez will continue to strain the inventory,” said Jon Monroe, advisor for maritime trade and logistics 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 goods.”
This delay affects the arrival of US imports filling shelves as well as US manufacturing components.
“Before the Suez Canal was interrupted, we expected the container situation to deteriorate in April as we already saw the shortage of containers,” said Monroe. “This channel closure won’t help. You will see products piling up on the factory floor.”
Chinese manufacturers are responding to the huge global orders for their goods. Pandemic lockdowns fueled consumer demand over the past year. As a result, a continuous historical flow of ships carrying millions of containers is clogging ports and slowing processing. The delays were 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 businesses this quarter.
Brian Bourke, SEKO Logistics’ Chief Growth Officer, told CNBC that the blockade creates the perfect storm for retailers struggling to replenish their inventory.
“The timing couldn’t be worse,” he said. “They have stimulus checks that are falling into the hands of consumers. After each stimulus check, we’ve seen a huge increase in product volume. We’re talking to companies that are running out of inventory. How can you get a stimulus when you don’t can?” Are you buying something? Your waiting time on your couch can be longer than three months. “