The stranded mega-container ship, Ever given in the Suez Canal, maintains about $ 400 million per hour in trade, according to the approximate value of goods moving daily through Suez, according to shipping company Lloyd’s List .
Lloyd’s values westbound traffic at about $ 5.1 billion a day, and eastbound traffic at about $ 4.5 billion a day. The blockade further highlights an already tight supply chain, said Jon Gold, vice president of supply chain and customs policy at the National Retail Federation.
“Every day the ship remains minted across the canal 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 spread across 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 approximately 12% of total world trade through it. Energy exports, such as liquefied natural gas, crude oil and refined oil, account for 5% to 10% of world shipments. The rest of the traffic is largely consumer goods ranging from fires to clothing, furniture, manufacturing, auto parts and exercise equipment.
“The key to this problem depends on how long it will take you to move the Ever Ever done,” explained Alan Baer, president of logistics provider at OL USA LLC. “U.S. importers are facing three-day arrival delays right now and that will continue to grow as long as the disruption continues.”
Horn of Africa
Suez has provided some relief to global importers, as they relied on it every year to avoid massive congestion on U.S. west coast ports that added days, if not weeks, to some deliveries from Asia. .
Baer, who has containers on ships trapped in both lanes of the Suez Canal, said that if it stays closed, the ships will be diverted and turn around the Horn of Africa, adding an additional seven to nine days. on the trip.
According to BIMCO, the largest of the international shipping associations representing shipowners, the bottleneck will only continue to grow and affect supplies.
“Everyone makes contingency plans as we talk,” said Peter Sand, chief analyst at BIMCO’s shipping department.
“Carriers manage one-third of their Asian trade chains on the east coast of the U.S. via Suez and two-thirds across the Panama Canal,” Baer said. “The disruption also affects import trade from India and the Middle East.”
Cleaning up the backlog
According to the World Shipping Council, the daily production capacity of the Suez Canal ship is 106. If the canal is closed for two days, it will take two more days after it reopens to clean up the backlog. The longer the delay, the longer it will take to get off the boats.
Lars Jensen, CEO of Sea Intelligence Consulting, tells CNBC that the hourly reliability of container ships is already in disarray as a result of the pandemic.
“Right now two out of three container ships arrive late,” he explained. “And when they arrive late, they take an average of five days,” he said, adding that a two-day delay is not a major problem. “However, the longer it drags, the worse it gets because then you’re talking about effectively removing the capacity of ships and containers at a time when they’re already lacking.”
A stranded container ship Ever given, one of the largest container vessels in the world, is seen after stranded in the Suez Canal, Egypt, on March 25, 2021.
Suez Canal Authority | Reuters
Inventory impact
In addition to delaying thousands of containers loaded with consumer goods, the stranded ship has also tied up empty containers, which are key to Chinese exports.
“Containers are already scarce in China and backup in Suez will put more emphasis on inventory,” said Jon Monroe, Jon Monroe Consulting’s maritime trade and logistics consultant. “We return to an environment prior to the Chinese New Year, where factories run on steam and struggle to find containers and space for their finished products.”
This delay will impact the arrival of U.S. imports filling store shelves, as well as U.S. manufacturing components.
“Before the Suez Canal was disrupted, we expected the container situation to get worse in April because we already saw the shortage of containers,” Monroe said. “This canal closure won’t help. You’ll start to see the product build up on the factory floors.”
Consumer demand
Chinese manufacturers respond to huge global orders for their products. Pandemic closures have fueled consumer demand over the past year. As a result, a continuous historical flow of ships containing millions of containers is clogging ports and slowing down processing. Delays have been costly.
Nike, along with retailers Crocs, Gap, Peloton, Footlocker, Five Below, William Sonoma, Steve Madden, Whirlpool, Urban Outfitters and Tesla, have cited supply chain issues affecting their business this quarter.
Brian Bourke, CEO of SEKO Logistics Growth, tells CNBC that the blockchain is creating the perfect storm for retailers who are struggling to rest.
“The time when this can’t get any worse,” he said. “You have stimulus controls in the hands of consumers. After each stimulus check, we’ve seen a significant increase in product volume. We’re talking to companies that run out of inventory. How can you get a stimulus if you can’t buy something?” “Waiting for your couch can take more than three months.”