Ever Given leaves in its wake weeks of supply disruptions

ISMAILIA (Egypt) • Now removed from the Suez Canal's main channel, the Ever Given leaves in its wake several weeks or months of disruptions across a world economy where the pandemic revealed both the sturdy backbone of global trade and an Achilles heel.

The reopening kicks off a new wave of stress on supply chains - the intertwined network of ships, ports, trucks, trains and warehouses that shuttle products from a factory on one side of the planet to a retail shelf or production line on the other. A surge in e-commerce means even greater consumer demand for speed, putting added strain on transportation and boosting freight rates to record highs.

Even a temporary clog in a major artery like the Suez is problematic as the world's nearly 6,000 container ships run on schedules, with a finite number of steel boxes to go around. They cannot be repositioned to where demand pops up or quickly shifted away from regions where economic activity is slow.

Capacity can be tweaked by adjusting the speed of vessels but also with a blunter tool: cancelling sailings that are not possible any more or are not economically viable. The Suez incident may unleash plenty of those.

That leaves the owners of cargo - and all the logistics industries handling imports and exports - at the mercy of the container carriers.

"The metaphorical dominoes have already been toppled," said Mr Lars Jensen of SeaIntelligence Consulting.

"We will continue to see the unfolding of congestion issues in Europe as the cargo arrives, blank sailings resulting from the severe delay of many vessels, as well as a deterioration of the equipment situation."

In the near term, ports from Europe to Asia are bracing themselves to be inundated with goods held up near Egypt for almost a week.

The disruption spreads well beyond container shipping: scores of oil, petrol, natural gas and other tankers and vessels were halted by the blockage, stunting normal supply and delivery routines across the energy and chemical sectors.

Ports are already struggling to handle normal shipping volumes because of the pandemic, and now they will need to cope with many delayed vessels all arriving at once or in quick succession, said Mr Max Wei, general manager of international business at Speedaf Logistics.

Under the best-case scenario, it will take a month or more to work through the congestion, he said.

BLOOMBERG