For almost a week in March, a 1,300ft-long container ship, named Ever Given, completely blocked shipping traffic at Egypt’s entrance to the Suez Canal. After frantic efforts to get it moving, it was finally freed on March 29th, but the blockage resulted in 200 ships being stranded at either end of the canal.
At a time when the global economy was still feeling the impact of the Covid-19 pandemic the blockage acted as an extra downward pressure on a recovery that was still in its infancy.
A vital shipping route
The canal plays an important role in the global economy, facilitating world shipping and trade. The hold-up highlighted trade vulnerabilities as more vessels joined the line of transit. The canal allows huge container ships to navigate a relatively direct route from Asia to Europe, rather than being forced to take a 3,500 mile diversion around Africa.
Around 12% of global trade passes through the Suez Canal, carrying well over $1tn worth of goods a year. Approximately 50 ships a day, carrying a total of $3bn to $9bn worth of cargo, will pass through the canal north or south between Suez port and Port Said. According to the Suez Canal Authority (SCA), nearly 19,000 ships, with a net tonnage of 1.17 billion tonnes used the canal in 2020. This figure is the second-highest load in the history of the canal.
As a result of the blockage, world shipping was slowed down significantly. Containers arrived at their destinations much later, causing a delay to how quickly they could be emptied and then refilled with goods bound for somewhere else.
Congestion at ports creates delays in freight arrival so supply chains, which were already facing challenges due to a global shortage of containers, were facing even more delays. This can cause issues in some industries where essential parts and equipment don’t turn up on time, leaving assembly lines idle.
This, in turn, drives up costs and these price increases eventually reach consumers. Nearly all global retail brands will send products through the Suez Canal, meaning that product shortages across the board were caused as a result of the hold-up
Weak links in the supply chain
While the blockage was dealt with in a relatively short period of time, it has highlighted the vulnerability of global supply chains. With such high numbers of ships moving through the canal there is always the potential for accidents and mechanical failures. Potential disputes and conflicts also remain a threat with the only viable alternative route taking ships around the horn of Africa.
This adds time, costs and potential security risk from criminal gangs who are active along parts of the African coast. The blockage helped to focus minds exploring the viability of alternative routes. A rail link via Israel is one alternative, another proposal would make use of the Trans-Siberian Railway. Longer term, climate change could make a route via the Arctic Circle possible.
For more advice and information about global shipping contact the knowledgeable and experienced team at SSO Logistics.
