Ever Given freed in Suez Canal, but ripple effect on trade will linger

Suez Canal
Menara Grafis/Adobe Stock

As the days went by and the disruption from the blockage of the Suez Canal by the container vessel Ever Given increased, the implications became more and more severe.
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Not all of those 360 vessels backed up waiting for the vessels to be freed are containing washing machines and laptops.

Suez Canal disruption

Some have live cargoes on board. Others have have ripening fruit. Lost cargoes will be significant, but may be worse for manufacturers will be the ongoing disruption.
ShippingWatch estimates it will take a week or more to clear the vessels back up into the Red Sea and Mediterranean.
But the damage has already been done.
Due to the non-arrival of vessels in both Europe and Asia, there will be trips out of both regions that are already being canceled (so-called blank sailings), because the container ships do not reach the ports on time and cannot unload and get new cargoes on board.

The market already struggled with congestion in some regions, notably Europe. In Asia, particularly China, there is a lack of empty containers. This will just exacerbate that problem, delaying empty boxes getting to their destinations by two weeks and further extending a situation that has resulted in sky-high rates.
The post cites shipping analyst Lars Jensen, CEO of Seaintelligence Consulting. Jensen said the “round trip dynamics” for a container ship sailing an Asia-Northern Europe route and return is 11 weeks. For an Asia-Mediterranean route, it’s 9-10 weeks.
“Therefore, it will have repercussions, which will be felt in the system for 2-3 months before it is cleaned up,” Jensen said. Furthermore, Jensen also predicted that the many ships that have rerouted in recent days, now sailing south of Africa to avoid queues, will continue. However, they will face the same congestion in Europe when they arrive.
As if, after automakers have been brought to a halt by semiconductor shortages this month, we need any further reminder of the complexity of global supply chains, along came a choke up of one of the world’s busiest shipping lanes.

Case for nearshoring

Of course, we will hear a chorus of calls for nearshoring to avoid the fragility of extended supply chains.
A recent Financial Times post, however, advised a dose of realism. The post noted a shot of the BioNTech/Pfizer vaccine requires 280 components from multiple countries. That fact underlines that even home based manufacturers have a supply chain. In turn, that chain is often based on supplies from somewhere overseas.
Sometimes, you can see your overseas supply chain, sometimes you can’t. But it is nearly always there, in some form or another.
The Ever Given has been freed and the long task of resolving the backlog can now begin.
The impact, however, will be with us for many months to come. It may yet add upward pressure on already elevated European freight rates.
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