Suez Canal blockage is delaying an estimated $400 million an hour in goods

The stranded mega-container ship in the Suez Canal sells an estimated $ 400 million an hour, based on the approximate value of goods transported daily through Suez. This comes from the data of the shipping company and the news company Lloyd’s List.

Lloyd’s estimates traffic to the west of the Canal at around $ 5.1 billion per day and traffic to the east at around $ 4.5 billion per day. The blockade continues to underscore an already tight supply chain, said Jon Gold, vice president of supply chain and customs for the National Retail Federation.

“Every day the ship is jammed across the canal causes delays in normal freight flows,” he said, adding that members of the trading group are actively working with shippers to monitor the situation and determine the best mitigation strategies. “Many companies continue to struggle with supply chain congestion and delays due to the pandemic. There is no doubt that the delays will permeate the supply chain and create additional challenges. “

A satellite image shows the stranded container ship Ever Given after it ran aground in Egypt’s Suez Canal on March 25, 2021.CNES / Airbus DS via Reuters

The Suez Canal, which separates Africa from Asia, is one of the busiest trade routes in the world, with around 12 percent of all world trade. Energy exports such as liquefied natural gas, crude oil and refined oil make up 5 to 10 percent of global shipments. The rest of the traffic consists mostly of consumer goods, ranging from fire pits to furniture, auto parts and exercise equipment.

“The key to this problem depends on how long it will take to move Ever Given,” said Alan Baer, ​​president of logistics company OL USA LLC. “US. Importers are currently three days late on arrival and this will continue to increase as long as the disruption continues.”

Suez has brought some relief to global importers as they have increasingly relied on it over the past year to avoid massive congestion in US west coast ports that added days if not weeks to some shipments from Asia.

Baer, ​​who has containers on ships stuck in both lanes of the Suez Canal, said if it stays closed the ships will be diverted and circulated around the Horn of Africa, adding an additional seven to nine days to a trip.

According to BIMCO, the largest international shipping association representing shipowners, the bottleneck will only increase and affect supplies.

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

“Carriers carry one-third of their trade lines in Asia via the Suez to the US east coast and two-thirds through the Panama Canal,” said Baer. “Disruptions also affect import trade from India and the Middle East.”

According to the World Shipping Council, the daily throughput capacity of the Suez Canal is 106. If the canal is closed for two days, it will take two more days to clear the backlog after it reopens. The longer the delay, the longer it will take for the ships to be deployed.

The reliability of the container ship schedule is already in disarray due to the pandemic, said Lars Jensen, CEO of Sea Intelligence Consulting.

“At the moment two out of three container ships are late,” he said. “And if they’re late, they’re an average of five days late,” he said, adding that a two-day delay isn’t a big problem. “The longer this goes on, the worse it gets because you are talking about effectively removing the ship’s capacity and the containers at a time when they are already scarce.”

The stranded ship not only delayed thousands of containers loaded with consumer goods, it also tied up empty containers, which are vital to Chinese exports.

“Containers are already rare in China and securing them in Suez will continue to strain the inventory,” said Jon Monroe, advisor for maritime trade and logistics at Jon Monroe Consulting. “We’re back in a pre-Chinese New Year environment where factories are running at full speed and struggling to find containers and space for their finished goods.”

This delay affects the arrival of US imports filling shelves as well as US manufacturing components.

“Before the Suez Canal disruption, we expected the container situation to worsen in April as we saw the shortage of containers,” said Monroe. “Closing the canal will not help. You will see products pile up on the factory floor. “

Chinese manufacturers are responding to the huge global orders for their goods. Pandemic lockdowns fueled consumer demand over the past year. As a result, a continuous historical flow of ships holding millions of containers together is clogging ports and slowing processing. The delays were costly.

Nike and retailers Crocs, Gap, Peloton, Foot Locker, Five Below, Williams-Sonoma, Steve Madden, Whirlpool, Urban Outfitters and Tesla all cited supply chain issues affecting their businesses this quarter.

According to Brian Bourke, Chief Growth Officer of SEKO Logistics, the blockade creates the perfect storm for retailers struggling to replenish their inventory.

“The timing couldn’t be worse,” he said. “They have stimulus checks that get into the hands of consumers. After each stimulus check, we noticed an enormous increase in product volume. We speak to companies that are running out of inventory. How can you have an incentive when you can’t buy anything? Waiting for your couch can take more than three months. “

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