What the world can learn from the Suez Canal crisis?
Recently, we have all heard the news and the memes floating around all over the internet about a skyscraper Ever Given ship being stuck in the Suez Canal, sending massive shock and global attention. It is a highly unpredicted event, and while it impacted various parties from government bodies and businesses, resulting in huge losses, many in social media has been making light of the situation through funny comics, memes, and parody accounts. Through this article, we are going to dive deep into this famous event in-depth, to see how it actually has impacted the global trade, and further, us as consumers.
The Ever Given is a Taiwanese container-transportation company, co-owned by Luster Maritime and Higaki Sangyo Kaisha, which is being leased by Evergreen Marine Corp. Approximately 3.7 miles north of the canal’s southern entrance, the Ever Given ship was stuck near Suez which is a seaport city located in northeastern Egypt. The ship was on its way to the port of Rotterdam from China when its owners primitively announced that the ship was pushed sideways due to the sudden high winds in a sandstorm. The Egyptian forecasters said that the high winds hit the area with winds gusting at speeds of 31 miles per hour. Nonetheless, the chairman of Egypt’s Suez Canal Authority Osama Rabie provided a contradictory version of events. “Weather factors were not the main reasons for the ship’s grounding,” he said, and “technical or human errors”, the BBC reported which may have played a role in the accident. According to Lloyd’s list, this incident has prevented more than $50 billion in global trade, and it was holding up an estimation of $9.6 billion (£7bn) of goods each day. These goods include coffee, toilet paper, coffee, and furniture, and many other imported goods creating shortages. Thus, impacts of this situation would eventually be passed on to the customer in terms of higher prices, more delays, impacting everything from fuel to clothing to TVs. “There is everything on that ship,” McManus says. “If you buy it in a store, it is on that ship.” Captain Morgan McManus offered his expert opinion on the ship blockage since he is the Master of the Training Ship Empire State VI.
Historically, Suez Canal has always been known as a canal with high business potential, as its strategic location made it possible for trade ships to take the shortest maritime travel route from Asia to Europe and back, without having to travel around Africa. No wonder, it holds an important position for world trade. It is estimated that at least 12% of the world trade volume and around 1 million barrels of oil and 8% of liquified natural gas also passed the canal. The Ever Given ship got stuck for approximately 6 days, resulting in hundreds of ships carrying 9.6 billion USD or 7 billion GBP worth of goods being held, not able to pass the canal.
The global supply chain is currently already strained by the Covid-19 pandemic, and the canal closure will definitely restrain it more, with the impact being profound potentially for weeks, if not months. Tight health protocols to prevent virus spread have been put in place, making it not easy for the ships to load and unload their goods in other destinations. Other ships that could not pass have the option to take a longer maritime route which takes longer times and more expensive to do as companies have to prepare more fuel and another delay from the extra days needed to travel via Cape of Good Hope in South Africa. Other companies might take airplanes and trains instead. However, even after the ship is unstuck, the blockage will still cause disruption for the flows of the assembly lines of containers used in transporting the items on the ships, as all other ships will still experience massive 6 days delay.
This blockage has the potential to affect numerous companies, especially Asian and European companies that rely on the canal for their shipments. US companies might not be as affected since most of their shipments from and to Asia passes the West Coast instead. Imported fast-moving consumer goods and automobile parts are amongst that will get affected for some time. Furthermore, this will also affect the shipments of natural oil and gas from the Middle East to Europe. However, the demand for oil and gas is currently generally low due to the pandemic, so since the blockage didn’t last as long as predicted, the bottlenecks in these areas might be minimized.
Egypt seeks $1 billion compensation after the ship blocked the Suez Canal. Exquisitely, separate crisis contingency plans for each worst-case scenario should be in the saddle by companies and organizations. Brian Alster, a general manager for third party and risk and compliance for Dun & Bradstreet which is known as an American company that provides commercial data and insights for businesses mentioned that “The Suez Canal incident gives us yet another reason for businesses to invest in data and technology to create an agile, geographically dispersed supply chain that can quickly pivot during unexpected events.” Thereby, more monitoring is needed to avoid a variety of risks that could impact the productivity of their supply chain.
Furthermore, it took 14 tugboats operating the pulling of manoeuvres from three directions to successfully free the ship and this made it easier for the dredgers to dislodge the stranded vessel on March 29, 6 days after it got stuck. As reported by The New York Times, “a full moon produced a king tide that allowed for a few extra inches of tidal flow to help refloat the Ever Given”. There were both domestic and international recovery teams helping out. “Today the Egyptians succeeded in ending the crisis of the grounded ship in the Suez Canal, despite massive technical complications which engulfed this operation,” he wrote in an Arabic-language tweet.
Although the ship is unstuck and the queue of the ships is steadily going down, there is still an expected one to two days delay for the shipments passing the Suez Canal. This event also serves as a reminder of how vulnerable the canal actually is and highlights the importance of its strategic use for global business and trade. Despite the advancement of technology, we often overlook what seemingly as little things, not knowing it can bring such a huge impact on the system as a whole. This is not Suez’s first blockage, however, it remains one of the memorable ones for many, especially with the memes created and jokes shared because of it, and how a lot of people can deeply relate to being stuck in navigating their life through the current pandemic. As a designer and writer, Chaz Hutton, said it, through his drawing of the stuck ship, “we are all, in our own little way, that ship.”
Reference:
https://eu.usatoday.com/story/money/2021/03/26/suez-canal-blockage-how-impact-consumers/7010047002/
https://qz.com/1989788/why-the-suez-canal-is-vital-to-global-trade/ https://time.com/5950888/suez-canal-boat-freed-explained/
https://www.bbc.com/news/business-56533250
https://www.bbc.com/news/business-56541193
https://www.britannica.com/topic/Suez-Canal
https://www.theguardian.com/world/2021/mar/24/huge-container-ship-blocks-suez-canal-evergreen
https://www.worldfinance.com/news/how-the-suez-canal-blockade-affected-global-trade