24 March, 2021

Global Supply Chain Gets A New Roadblock At Suez Canal

There's no clear sailing in the Suez Canal right now.

As if the global supply chain for consumer products didn’t have enough problems, now there’s a big monster roadblock in the Suez Canal.

The Ever Given, a container ship that is described as longer than Eiffel Tower — 984 feet if you don’t have your tape measurer handy — has run aground in the Canal, a key waterway that connects freight transit between Asia and Europe, often continuing on to the east coast of the United States.

Ongoing reports suggest efforts to free up the ship and reopen the canal are in progress but it appears it may be stuck for days. The canal is controlled by Egypt and connects the Red Sea and traffic coming from China, India and elsewhere in Asia with the Mediterranean Sea, where ships can proceed to ports in Europe and beyond.

The situation comes as the global supply chain is dealing with a myriad of issues that have created a worldwide shortage of goods in numerous consumer product categories, particularly in the U.S.

Among the supply chain issues are:

• A shortage of container ship capacity, caused by freight companies that have cut back the number of available vessels in what may be an effort to raise prices. Shippers report the price of shipping a container has often doubled since the start of the pandemic.

• A shortage of the containers themselves, the result of most transit being one way from Asia to western ports and the inability of those empty containers to make their way back to be refilled.

• Backlogs in ports, particularly on the west coast of the U.S. due to reduced numbers of workers who are practicing social distancing. Workforces at the ports have also been hindered by Covid infection rates.

• Labor shortages in truck drivers on all sides of the pipeline, exasperated by shortages in the trucks themselves. Factories in Asia report they are often running out of space to store finished goods they are unable to get to shipping ports.

• And finally increased demand in several product areas — particularly home furnishings, consumer electronics and other items that are being used by homebound consumers — that is driving more business… and the resulting need to ship more goods.

It’s been described as a perfect storm for the supply chain, one that those in the middle of it don’t expect to see any relief from until at least the third or fourth quarter of 2021. To this is now added the bottleneck in Suez. If you remember your history — or at least your movie history — when Lawrence of Arabia led an army of Arabs that blew up ships in the canal blocking traffic during World War I, it took some time to free up the waterway again.

This situation will likely get resolved much faster but for the time being, many importers — and the consumers who will buy their merchandise — should plan on delays getting a little bit worse before they get a little bit better.

Source: Forbes