Suez Canal supertanker blockage reveals trade worries
The plight of a mammoth container ship stuck in Egypt’s Suez Canal has highlighted still more pressure points in global trade, a year after supply chains were disrupted by the coronavirus pandemic.
Salvage teams managed to free the Ever Given on Monday, but it was unclear when ship traffic through the critical trade gateway would return to normal. The Panama-flagged, Japaneseowned ship was lodged in a single-lane stretch of the canal for nearly a week, holding up $9 billion each day in global trade.
Economists say the Ever Given’s disruption of shipping through the Suez Canal probably won’t have an impact on global trade for more than a few weeks, and is unlikely to derail global growth this year as more people around the world get COVID-19 vaccines and economies reopen.
But it’s another wake-up call for companies that have set up their business to rely on supply chains with little room for error, said William Lee, chief economist at the Milken Institute.
“This is a warning about how vulnerable our supply chains are and how the just-in-time inventory techniques that have been so popular have to be rethought,” he said.
“The shortages and the supply chain shortages that cause assembly lines to shut down – that will have a greater impact,” Lee added.
Many countries got a harsh lesson in those realities last year when commerce was disrupted in myriad ways after new coronavirus outbreaks began in China, the world’s factory floor.
Consumers everywhere soon found that ordering online was an adventure in the unknown, with many factories shut down and trade between Chinese provinces stalled. Obtaining supplies of medicines and vital personal protective equipment such as face masks and other medical supplies became challenging, and sometimes impossible.
The disruption from the Suez Canal blockage is less dramatic but not insignificant. The canal carries more than 10% of global trade, including 7% of the world’s oil. Ships are already having to detour around the Cape of Good Hope in South Africa to avoid it.