The blockade of the Suez Canal is delaying an estimated $ 400 million an hour in goods

The stranded mega-container, Ever Given in the Suez Canal, is holding an estimated $ 400 million per hour of trade, based on the approximate value of goods moving through Suez every day, according to shipping data and the company’s Lloyd’s news. Ready.

Lloyd’s values ​​westbound canal traffic at approximately $ 5.1 billion per day and eastbound traffic at about $ 4.5 billion per day. The lockdown is putting more emphasis on an already strained supply chain, said Jon Gold, vice president of supply chain and customs policy at the National Retail Federation.

“Every day the ship remains trapped in the canal adds delays to normal cargo flows,” he said, adding that members of the trade group are actively working with carriers to monitor the situation and determine the best mitigation strategies. “Many companies continue to struggle with supply chain congestion and delays stemming from the pandemic. There is no doubt that the delays will affect the supply chain and cause additional challenges.”

The Suez Canal, which separates Africa from Asia, is one of the world’s busiest trade routes, with approximately 12% of total world trade passing through it. Energy exports such as liquefied natural gas, crude oil and refined oil account for 5% to 10% of world shipments. The rest of the traffic is largely consumer products ranging from campfires to clothing, furniture, manufacturing, auto parts and exercise equipment.

“The key to this problem depends on how long it takes to move the Ever Given,” explained Alan Baer, ​​president of logistics provider OL USA LLC. “US importers are facing three-day arrival delays at the moment and this will continue to grow as the disruption continues.”

horn of africa

The Suez has provided some relief to global importers as last year they increasingly relied on it to avoid massive congestion at ports on the US west coast, adding days, if not weeks, to some deliveries from Asia.

Baer, ​​who has containers on ships stuck on both lanes of the Suez Canal, said that if it remains closed, the ships will detour around the Horn of Africa, adding an additional seven to nine days to a trip.

According to BIMCO, the largest of the international shipping associations representing shipowners, the bottleneck will only continue to grow and impact supplies.

“Everyone is making contingency plans as we speak,” said Peter Sand, chief shipping analyst at BIMCO.

“Carriers direct a third of their trade chains from Asia to the east coast of the United States through Suez and two-thirds through the Panama Canal,” Baer said. “The disruption is also affecting the import trade of India and the Middle East.”

Clean build-up

According to the World Shipping Council, the Suez Canal’s daily production capacity of vessels is 106. If the canal is closed for two days, it will take an additional two days after reopening to clear the backlog. The longer the delay, the longer it will take to get the boats out.

Lars Jensen, CEO of Sea Intelligence Consulting, told CNBC that the reliability of the schedule for container ships is already in disarray as a result of the pandemic.

“Right now, two out of every three container ships are late,” he explained. “And when they are late, they are on average five days,” he said, adding that a two-day delay is not a major problem. “However, the longer this is delayed, the worse it gets because then there is talk of effectively removing capacity from ships and containers at a time when they are already in short supply.”

The beached container ship Ever Given, one of the largest container ships in the world, is seen after it ran aground, in the Suez Canal, Egypt, on March 25, 2021.

Suez Canal Authority | Reuters

Inventory impact

In addition to delaying thousands of containers loaded with consumer items, the stranded ship has also immobilized empty containers, which are key to Chinese exports.

“Containers are already in short supply in China and the support in Suez will make inventory even more stressed,” explained Jon Monroe, maritime trade and logistics consultant at Jon Monroe Consulting. “We’re back in a pre-Chinese New Year environment where factories are running at full steam and struggling to find containers and space for their finished products.”

This delay will affect the arrival of American imports that fill store shelves, as well as American-made components.

“Before the Suez Canal disruption, we expected the container situation to get worse in April because we were already seeing a shortage of containers,” Monroe said. “This closure of the canal will not help. You will start to see product piling up on factory floors.”

Customer demand

Chinese manufacturers are responding to huge global orders for their products. Pandemic lockdowns have driven consumer demand for the past year. As a result, a continuous historical flow of vessels with millions of containers is clogging ports and slowing down processing. The delays have been costly.

Nike, along with retailers Crocs, Gap, Peloton, Footlocker, Five Below, William Sonoma, Steve Madden, Whirlpool, Urban Outfitters and Tesla, mentioned supply chain issues that affected their business this quarter.

Brian Bourke, SEKO Logistics’ director of growth, told CNBC that the lockdown is creating the perfect storm for retailers struggling to restock.

“The timing of this couldn’t be worse,” he said. “There are stimulus checks in the hands of consumers. After every stimulus check, we have seen a huge increase in product volume. We are talking to companies that are running out of inventory. How can you have a stimulus if you can’t buy? something? Your wait for your sofa can be longer than three months. “


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