The ongoing obstruction in the Suez Canal is causing a considerable disruption in the consumer supply chain, which is already facing challenges due to the pandemic. The current blockage is caused by the Ever Given, the largest and heaviest-laden vessel to ever get stuck in the canal. Similar incidents have occurred in the past, but experts predict that freeing the Ever Given could take weeks.
The longer the ship remains immovable, the higher the shipping costs will rise. These increased expenses are likely to be either transferred to consumers in the form of higher prices or absorbed by retailers who are already under pressure. The Ever Given was en route from China to Rotterdam when it ran aground, and it is estimated that the blockage is costing around $400 million per hour, according to Lloyd’s List.
The financial impact of this situation is significant, with westbound traffic through the canal normally valued at $5.1 billion per day, and eastbound traffic at $4.5 billion per day. With hundreds of ships currently delayed, billions of dollars’ worth of goods are stuck on immobilized vessels. This delay could cause major issues for non-essential retailers in the UK who are preparing to reopen on April 12.
Trade bodies in various countries are working together with carriers to assess the situation. However, at the moment, there is little that can be done aside from considering diverting vessels around Africa, which would further increase shipping times. The Suez Canal is an essential pathway for global trade, reducing travel time by approximately 10 days for goods traveling from east to west. It accounts for about 12% of total global trade and nearly a third of daily container shipping volumes.
Once the canal is finally unblocked, there will be building queues and limitations on daily traffic, resulting in a substantial backlog that will take time to clear. This backlog could have lasting effects on shipping flows and costs for months to come.
In conclusion, the obstruction in the Suez Canal poses a serious threat to the consumer supply chain. The longer the Ever Given remains stuck, the higher the costs will be, which will ultimately impact consumers or retailers. This disruption will have a ripple effect on shipping flows and costs, significantly affecting global trade and supply chains for months ahead.
Useful links:
1. Suez Canal Official Website
2. BBC: Suez Canal Latest Updates
