Business & Investment

Blocked Suez Canal compounds stress the supply chain

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Removing the container ships blocking the Suez Canal will take longer than the initial concerns of amplifying global supply chain disruptions, from oil to grain to automobiles, until at least March 31st. ..

Long-term outages of traffic through one of the world’s most important waterways are expanding the already fully operational containership industry. This threatens costly delays for European companies that rely on a stable flow of imports from Asia and consumers who like to buy quickly online during a pandemic. ..

It takes about a week to resurface a 200,000-ton ship called Evergiven, which is still firmly sandwiched between important maritime trade routes, and in some cases it could take longer. Said that people familiar with the matter were asked not to be identified. Rescue operations were initially expected to last only a few days.

Chris Rogers, Panjiba’s lead trade analyst at S & P Global Market Intelligence, said: “The short-term spillover increases the likelihood of consumer goods being out of stock and risks the just-in-time manufacturing supply chain and product shortages already devastated by Brexit facing further disruption.”

Even before Evergiven ran aground on the Suez Canal on March 23, the world trade network was already showing signs of tension due to the year-long economic turmoil of the coronavirus pandemic.

The world’s largest commodity flow between China and the United States faces nearly five months of bottlenecks at the ports of Los Angeles and Long Beach. Importers waited for the cargo to arrive for a few weeks, but the exporter had the knock-on effect of not being able to secure the empty steel boxes needed to ship the cargo abroad.

Current concerns are that the Suez incident exacerbates Europe’s logistical challenges, resulting in voyage cancellations, container shortages, and higher fares.

The specialized dredger “Mashoor” assists in attempts to remove a clogged container ship. (Bloomberg News)

Since March 23, work with tugboats and excavators (smaller equipment compared to 400-meter (1,300-foot) vessels) has never been successful. According to Bloomberg data, as rescue teams struggled, the waiting queue for ocean-going vessels loaded with billions of dollars worth of oil and consumer goods increased from 186 on March 24 to more than 300.

According to Randy Givens, Senior Vice President of Equity Research for Energy Maritime at Jefferies LLC, if cargo needs to be unloaded from a stranded vessel or the canal itself needs to be extensively repaired, “downtime lasts at least two weeks. There is a possibility. ” .. According to IHS Markit Ltd, Ever Given may own approximately $ 1 billion in merchandise.

Vessels that were to cross the Suez Canal are starting costly and time-consuming detours around Africa as the shipping sector scrambles to keep deliveries moving. Korean HMMCo. Instructed a container ship that left the UK on March 22 to bypass the Cape of Good Hope and avoid a deadlock. According to Kpler analyst Rebecca Chia, at least seven liquefied natural gas carriers are coordinating routes away from the canal, and major shippers such as AP Moller-Maersk A / S and Hapag-Lloyd AG are also studying detours. I am.

Shipping costs have also skyrocketed, with the price of shipping a 40-foot container from China to Europe almost quadrupled from a year ago. This adds a new burden to the global supply chain that is already emerging from the pandemic that is causing havoc with shortages and delays.

Breakers estimate that the blockage of the canal now supports the flow of about 2 million barrels of oil per day, causing bulk carriers to transport goods from wheat to iron ore. Global manufacturers are already prepared for delays in both finished product shipments and materials essential to the production line.

HMMCo waiting to return to Asia outside the canal. The list of cargo on board the ship shows the expansion of the industry involved in the turmoil, with goods such as wood, machinery, frozen beef, paper, powdered milk, furniture, beer, frozen pork, auto parts, chocolate. ,Cosmetics.

Caterpillar Inc, the largest machine maker in the United States. Said that it is facing shipping delays and is considering airlift products as needed, and Japan’s Envision AESC, a supplier of electric vehicle batteries, relies on the Suez Canal to import some of its electrodes. He said he was doing it.

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Seabay International Freight Forwarding Ltd in Shenzhen, which sells Chinese products such as toys, pillows and mattresses sold on platforms such as Inc. The owner, Mark Ma, says his company crosses a closed canal.

“If you can’t resume in a week, that would be scary,” Ma said. “Fares will skyrocket again. Products are delayed, containers cannot be returned to China and no more can be delivered.”

According to Givans, vessels currently planning to use the Suez Canal outside the Red Sea will need to decide whether to bypass Africa, adding 10 to 15 days to the voyage. Ships lined up at both ends of the Suez Canal area are likely to wait to determine how long the passage will be closed before making a detour decision, he said.

For container lines, which account for about 80% of the world’s commodity trade, the long-standing bottleneck between Europe and Asia is that importers plan purchases, manage inventories, stock on store shelves and produce. There is a risk of postponing the shipping schedule set a few months ago so that the line can be up and running.

The problem is exacerbated by the container ships having to wait every day. Vessels arriving a few days late cannot be emptied or transshipped in time for their scheduled return journey. As a result, carriers cancel their trips, further limit capacity and boost fares.

Logistic challenges may continue even after the canal is unblocked.

Greg Knowler, senior European editor of the JOC, which is part of IHS Markit, said: “Rotterdam and Antwerp expect longer waiting times for ships, more time to handle ships and clean up containers from the yard, and companies expect longer waiting times for imports. I will. “

For a super tanker that transports oil from the Middle East to Europe, bypassing the Cape of Good Hope in South Africa adds 6,000 miles to the journey and costs an estimated $ 300,000 in fuel.

Ship brokers report that oil traders are increasingly hiring tankers with “just in case” options to sail Africa in the event of prolonged blockages. Vessels traveling in the air to collect oil in Northwestern Europe can be delayed, forcing local exporters to look for alternative carriers, according to people involved in the market.

In some areas, charter prices for oil tankers have risen since the first blockage. The Suezmax vessel, which typically carries one million barrels through the canal, currently raises about $ 17,000 a day, the highest since June. If more ships were forced to sail on the southern tip of Africa, it would boost rates as travel time increased.

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Blocked Suez Canal compounds stress the supply chain Blocked Suez Canal compounds stress the supply chain

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