Suez Canal block may cause export delays

Concerted efforts needed from entire shipping industry to clear logjam

The cargo ship blocking the Suez Canal may cause a delay of three to five days in Chinese exports and temporarily affect international trade, as clearing the logjam requires concerted efforts from the entire shipping industry, said experts.

Despite the efforts made so far, the Suez Canal continues to remain blocked, holding up several vessels in one of the world's most important waterways.

The 400-meter container ship Ever Given ran aground on Tuesday, 115 kilometers north of the south entrance of the Suez Canal, a waterway vital for East-West cargoes and responsible for the movement of about 10 percent of global seaborne trade. Nearly 200-plus ships were at a standstill, as of Thursday, according to shipping journal Lloyd's List.

For vessels yet to reach the human-made waterway, there are other options, but that would significantly increase the transit time for ships between Asia and Europe, experts said.

The world's number one line A. P. Moller Maersk said it was considering diverting vessels around Africa's Cape of Good Hope, according to a Reuters report.

"An extra 840 nautical miles would be added for the deviation, which means vessels from China to Europe would need an extra three to five days for delivery of goods," said Lin Guolong, director of the Logistics Research Center at Shanghai Maritime University.

According to Lin, about 60 percent of the Chinese vessels from China to Europe and Africa, as well as more than 95 percent of regular liners between China and Europe cross the canal during their voyages, in an attempt to avoid the much longer trip around the southern tip of Africa.

Almost 19,000 ships passed through the canal in 2020, or an average of 51.5 ships per day, according to the Suez Canal Authority.

Experts said the blockage would erode the recovery of global trade and supply chains if it extends for more than a couple of days.

Since the outbreak of COVID-19, global trade has been suffering due to the high rates of ship cancellations, shortages of containers, as well as slower handling speeds at ports.

"In recent days, the number of consultations on China-Europe freight trains rose threefold, an indication that companies are looking for alternatives," said Zhou Shihao, founder and CEO of YQNLink, a Shanghai-based global intelligent logistics platform.

Chinese exporters, ports, and shipping companies are already grappling with higher freight charges for shipments to Europe and the United States since the second half of last year.

There are 1.2 billion metric tons of cargo moving through the waterway annually, and about 1.9 million barrels of oil are shipped through the Suez Canal each day, according to the Suez Canal Authority and Lloyd's List Intelligence.

Experts hold varied views on the time needed to clear the blockage. If the traffic jam at Suez Canal extends to weeks or even a month, shipping between Asia and Europe will be hit with freight rates set to soar, according to Zhou.

Although Chinese vessels bound for the US may not feel the pain immediately, US consumers could feel the impact if the blockage carried on and disrupts the global supply chain.

Even if the Ever Given gets refloated and towed away in the next three to four days, Lin believes it may take between two weeks to one month for the Suez Canal to return to normalcy.

Lin urged the global shipping industry to take coordinated action in restoring traffic at one of the world's busiest shipping channels for oil and refined fuels, grain and other commodities. "After all, we are living in the same planet with a shared future."