Almost a week after mega container ship Ever Given became lodged in the Suez Canal causing widespread disruption to global trade, the ship has been refloated and the first of the 420+ vessels that were trapped behind it are resuming their journey. The Suez Canal, an artificial waterway that separates Africa from Asia, is one of the world’s busiest trade routes. It is a critical channel for the import and export of containerised goods and is a key trade route for Europe and Asia. Acco
According to Lloyd’s List shipping intelligence, approximately US$9.6 billion in goods, including exercise equipment, appliances, apparel and consumer electronics, pass through the Suez Canal each day.
Without it, another 10 days of travel would be required to traverse the coast of Africa.
And while the blockage was cleared much earlier than anticipated, the problems have only just begun for retailers.
James Sheerin, senior consultant at supply chain consultancy TMX Global, told Inside Retail that the backlog in global berthing schedules will lead to delays in goods to retailers and, ultimately, the end consumer.
“The knock-on impact in global trade will be significant,” Sheerin said.
“An array of commodity classes and industries that are key to the retail industry will be impacted by the backlog, including textiles, automotive, oil and gas and food and beverage.”
According to Reuters, Swedish furniture giant Ikea has about 110 containers on Ever Given alone, and the company is still investigating how many others are on the remaining vessels.
Knock-on effect
The delays will also slow down the reuse of vessels for import and exports around the globe, which will in turn slow down supply in the market, at a time when demand continues to rise due to Covid-19.
“This will exacerbate supply issues in container equipment and available vessels to meet demand, which will increase pressure on freight rates and the risk profile of ocean freight shipping,” Sheerin said.
“For Asia, a key global manufacturing hub, there will be less empty container returns for export reuse, which will place continued pressure on supply in China, impacting all stakeholders in the supply chain, including retailers in Asia-Pacific who rely on China for manufacturing.”
Sheerin said it will take some time before the canal is up and running as before, and it’s likely that some vessels will need to reroute along the coast of Africa if they have not already entered the Canal. With the inevitable delays, he expects many businesses will avoid shipping altogether and opt for alternative transport.
“Some importers and exporters may consider shifting to higher cost airfreight to avoid the current risks of ocean shipping, or a combination of both sea freight and airfreight to transit cargo,” Sheerin said.
Future trade risks
Sheerin said the dependence on this one channel has highlighted trade risks going forward for the international community and revealed a need for better management.
“The blockage of the Suez Canal and has been a wakeup call for global trade’s reliance on this narrow passage to reduce vessel transit times. It only takes one vessel in the thousands passing through to put the brakes on global trade,” he said.
“This presents serious risk given the increase in global trade putting pressure on routes like the Suez, which have been historically heavily relied on. In light of this recent incident, there will be additional pressure to ensure management of this route is improved and congestion risks are mitigated.”
Because of the global connectedness of supply chains today, Sheerin said that even if importers and exporters from specific nations are not directly affected, there is an indirect impact to all stakeholders, including the end retail consumer.
“This will likely force the industry to improve trade efficiency and reduce risk, whether that is through sourcing diversification, increasing the use of air freight, the utilisation of alternative trade routes or increasing infrastructure development to efficiently accommodate trade growth,” he said.