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How Much Suez Canal Blockade Cost to the Global Trade?


After 6 days of efforts to end the Suez Canal blockade, tugboats were finally able to free the Ever Given container ship. The incident brought global seaborne trade to a halt and caused massive disruptions in the global supply chain.

Rescuers moved the huge vessel without removing much of the load; a move that saved a considerable amount of time and cost. However, according to the reports, the trade traffic is far from normal.

There were almost 420 ships stuck behind the Ever Given, which immediately resumed their journey after the path unclogged. 37 ships close to the stuck point cleared the way overnight, while 70 may pass through the 120-mile Suez Canal by the end of 30th March 2021.

If they continue at this pace, it would take approximately take 3 to 3.5 days for the remaining ships to clear the waterway in Suez Canal.

Suez Canal Blockade Intensifies the Fears of Global Trade Issues

It became the most intense rescue operation in the modern history with the fate of global trade hanging in between.

Around 12% of global trade happens through this route and it is the shortest link between Asia and Europe. The 1,312ft long shipping container was diagonally stuck between the route, blocking it from both sides since 23rd March.

The incident became content for some hilarious memes on the internet, which highlighted the impacts of globalization, that are still haunting civilizations.

Critics have always been advising against the use of the JIT (just in time) approach in logistics. Japanese car manufacturer Toyota created this method to cut supply chain costs and other companies adopted it universally. It involves companies avoiding stockpiling and only ordering shipments whenever there is a demand, even if it means ordering daily.

A critical weakness associated with this method is that disrupts the balance of the global supply chain. When there’s a problem with one link, the whole process breaks, as can be seen in the case of the Suez Canal blockade.

How Much Global Trade Lose on Daily Basis?

Efforts Unloading the cargo was proving to be an additional cost of the Suez Canal blockade. According to reports, the estimation of trade loss ranged from 6 to 10 billion USD per day. Moreover, it forced some ships to take a 3,000 miles long detour via the Cape of Good Hope. Those who did not wait for Ever Given to move, faced an extra 26,000 USD in fuel costs per day.

The total trade loss due to this incident can be roughly estimated at 57 billion USD in 6 days. However, the estimation of loss is based on the cargo shipment that was blocked for a long time. The economic impact of this incident on countries could possibly be much greater. It is because of the increase in Oil and Gas prices due to the fears about blockage taking a long time to solve.

The Looming Shadow of Further Delays

Even after refloating the Ever Given, the problem of unloading massive cargo at the ports of destination is still there. Analysts have expected long-term holdups which will result in widespread congestion and delays because multiple ships can arrive at the same time. Not having goods on hand and only making them available when they are required, greatly increases the chances of traffic crises.

The current trade system has severe disadvantages to disrupt production and delivery. A similar example is also seen in Automobile Industry with the shortages of semiconductors. Their demand grew during the pandemic along with the demand for consumer electronics that require semiconductors for high-frequency communication. Most mobile phone companies did not have it in stock and ordered it upon demand. As a result, the production was unable to cope with both industries at the same time.

Moreover, companies have more than one supplier based in locations far from their home base. The coronavirus pandemic had already forced companies to rethink the process of the global supply chain because of additional delays caused by COVID restrictions. Explosive online demands from locked-down consumers were also putting an addtional pressure on global transport links. If anything goes wrong, the cost saving features of JIT approach cannot save the industries from losing sales.

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