The stranded mega-container ship, Ever Dado in the Suez Canal, is holding about $ 400 million an hour in trade, based on the approximate value of goods that are moved through Suez every day, according to transportation data and Lloyd’s List news company.
Lloyd’s values westbound traffic at about $ 5.1 billion per day, and eastbound traffic at around $ 4.5 billion per day. The blockade is further stressing an already strained supply chain, said Jon Gold, vice president for supply chain and customs policy at the National Retail Federation.
“Every day that the ship remains stuck along the channel 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 delays resulting from the pandemic. There is no doubt that delays will spread 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 approximately 12% of total global trade passing through it. Energy exports, such as liquefied natural gas, crude oil and refined oil, represent 5% to 10% of global shipments. The rest of the traffic is basically made up of consumer products, from bonfires to clothing, furniture, manufacturing, automotive parts and fitness equipment.
“The key to this problem depends on how long it will take to move Ever Given,” explained Alan Baer, president of the logistics provider for OL USA LLC. “US importers face delays in arriving three days now and this will continue to grow as long as the disruption continues.”
Horn of Africa
Suez provided some relief to global importers as they increasingly relied on it last year to avoid massive congestion in the United States’ west coast ports, which added days, if not weeks, to some deliveries from Asia.
Baer, who has containers on ships trapped on both sides of the Suez Canal, said that if it remains closed, the ships will be diverted and bypass the Horn of Africa, which adds another seven to nine days to the trip.
According to BIMCO, the largest international shipping association representing shipowners, the bottleneck will only continue to grow and impact supply.
“Everyone is making contingency plans while we talk,” said Peter Sand, chief navigation analyst at BIMCO.
“Carriers run one-third of their commercial chains in Asia to the east coast of the United States via Suez and two-thirds via the Panama Canal,” said Baer. “The disruption is also affecting import trade from India and the Middle East.”
Cleaning up the buildup
According to the World Shipping Council, the daily vessel flow capacity of the Suez Canal is 106. If the canal is closed for two days, it will take two more days after the reopening to clear the buildup. The longer the delay, the longer it will take to move the vessels.
Lars Jensen, CEO of Sea Intelligence Consulting, told CNBC that the reliability of the schedule for 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’re late, they’re an average of five days late,” he said, adding that a two-day delay is not much of a problem. “However, the longer this drags on, the worse it gets, because you are talking about effectively removing the capacity of ships and containers at a time when they are already in short supply.”
The stranded container ship Ever Dado, one of the largest container ships in the world, is seen after stranding, 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 items, the stranded ship also tied up empty containers, which are essential for Chinese exports.
“Containers are already scarce in China and the backup at Suez will further stress the stock,” explained 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 throttle and are struggling to find containers, as well as space for their finished products.”
This delay will affect the arrival of U.S. imports that fill store shelves, as well as U.S. manufacturing components.
“Before the Suez Canal broke, we expected the container situation to worsen in April because we already saw a shortage of containers,” said Monroe. “This channel closure is not going to help. You will start to see the product building up on the factory floor.”
Consumer demand
Chinese manufacturers are responding to huge global orders for their products. The pandemic roadblocks fueled consumer demand last year. As a result, a continuous historical flow of ships with millions of containers is obstructing ports and slowing processing. The delays have been costly.
Nike, along with retailers Crocs, Gap, Peloton, Footlocker, Five Below, William Sonoma, Steve Madden, Whirlpool, Urban Outfitters and Tesla, all cited supply chain problems that affected their businesses this quarter.
Brian Bourke, director of growth at SEKO Logistics, told CNBC that the blockade is creating the perfect storm for retailers struggling to replenish.
“The timing for this couldn’t be worse,” he said. “You have stimulus checks going into the hands of consumers. After each stimulus check, we saw a huge increase in the volume of products. We are talking to companies that are running out of stock. How can you have a stimulus if you can’t buy any? thing? Your wait for the couch can be more than three months. “