Suez Canal blockage exacerbating already strained global supply chains: Report


The exacerbated impact comes at a time of “unprecedented demand” as the Canal handles 12 percent of global trade.

Source: AFP

Source: AFP

The Suez Canal container blockage has further constrained already stained global supply chains like “never before” and will “heap pressure on businesses already facing container shortages, port congestions and capacity constraints,” CNN Business reported.

“There’s been a great convergence of constraints in supply chains like I’ve never seen before. The bottlenecks are widespread, affecting transport by air, ocean, and road. It really has been unprecedented,” Bob Biesterfeld, CEO of logistics company CH Robinson told the publication.

The 25-mile long logjam in the Suez Canal after the Ever Given ran aground the narrow waterway connecting the east and west, has snarled 237 vessels and oil tankers and could take weeks to clear, making the movement of goods more expensive.

The exacerbated impact comes at a time of “unprecedented demand” as the Canal handles 12 percent of global trade. It could hold up consumer goods from Asia to Europe and United States and in the opposite direction, movement of agricultural products.

Over 80 percent of global trade is carried out by sea and the disruptions have added “billions of dollars” to supply chain costs. Container shipping cost for sea import of US goods was $ 5.2 billion in February 2021, compared to $ 2 billion in February 2020, as per S&P Global Panjiva.

The report noted that there is fear that these costs – while currently within the supply chains, will “inevitably” be passed onto consumers and thus push inflation.

Gene Seroka, executive director, Port of Los Angeles said there is a “huge import surge” from American consumers after the lull caused by the COVID-19 pandemic. The phenomena has caused a “global container shortage”. For reference – US sea imports rose 30 percent in February 2021 from last year, 20 percent from February 2019.

With demand lopsided, empty containers have piled up are on the “wrong” side of the world and could not meet the sudden demand for Asian goods in Europe and North America.

Additional labour shortages, quarantine requirements, and social distancing measures have also help up functions.

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