Sector impacts of Canal closure

Several members of industry sectors have issued updates on the anticipated impact of the Suez Canal blockage.

Germany’s Enercon has said that it expected delays in wind turbine components from Europe to projects in Asia. The wind turbine maker also saw risks of congestion at ports, once the ships held up at the Suez Canal arrive at their destinations. Enercon is examining to what extent the problem will affect its supply chains.

At least seven supertankers were expected to load North Sea crude in April, with two or three of them likely to face delays due to the blockage in the Suez Canal, according to tanker fixture reports and ship tracking data compiled by Bloomberg.

UK retailers said on Friday that the impact would be “manageable”. Dixons Carphone Plc said that it had a small number of containers on the grounded Ever Given vessel but that “we don’t believe this will cause any meaningful disruption to our stock levels”. While some UK grocers were reporting small quantities of stock stuck both on the Ever Given and some container ships behind it, the products were mostly general merchandise and clothing rather than perishable food items.

The blockage adds to supply-chain disruptions that have already cost world trade more than $200bn since the start of the year, according to Allianz SE calculations. Every week the Suez Canal remains closed adds as much as $10bn to the bill.

The Suez blockage may mean limited availability of food, supply delays and higher prices at a time when economies and households are already grappling with rising food inflation and disruptions from Covid-19. Wealthy but food-deficit Gulf states and food aid-dependent Horn of Africa nations are particularly vulnerable to disturbances to grain flows. The canal handles at least 15% of global rice and wheat exports, according to research from Chatham House. Tim Benton, research director in emerging risks at Chatham House in London and a food security expert, said in an interview that “if it’s a delay of a month or longer it will put on a significant price pressure and reduce availability in some places. There are lots of compounding issues. The global food system is already under pressure from Covid. And clearly anything that adds a further straw to the camel’s back makes things bad.”

The Suez canal blockage won’t immediately impact Japan’s crude supplies, Finance Minister Taro Aso told reporters in Tokyo. “Unlike in the past, Japan currently has enough of an oil stockpile for around 200 days, so I don’t think this issue will immediately impact Japan’s oil supplies,” Aso said.

The blockage is not causing major problems for Russian grain exports because sales of wheat from the world’s top shipper are currently low, said Eduard Zernin, chairman of the Russian Union of Grain Exporters. There’s no sign yet of any significant Russian sales being caught up in the queue, he said.

Ukraine’s deputy economy minister and the head of the country’s grain group, which includes the top shippers, said they did not see any threats to the nation’s exports, although this was contingent on the situation being resolved “soon”.

Swedish furniture giant Ikea confirmed that there were containers with its products on ships that were waiting to make passage via the Suez Canal. “Depending on how this work proceeds and how long it takes to finish the operation, it may create constraints on our supply chain,” a spokesman for Inter Ikea Systems, the franchisor of the Ikea brand, told Bloomberg. Ikea said it was considering all supply options to help secure the availability of its products.

The total cargo value of a containership the size of the Ever Given is almost $1 billion, considering average value of products in an ocean container of about $40,000, according to IHS Markit. Once the backlog starts clearing, it will overwhelm terminals in Europe, which are experiencing labour shortages because of Covid-19, said Greg Knowler, senior European editor at JOC by IHS Markit. “Rotterdam and Antwerp expect ship wait times to lengthen, and expect it will take longer to handle ships and clear containers from the yards, and businesses will have to wait longer for their imports,” Knowler said.

Mark Ma, owner of Seabay International Freight Forwarding Ltd., a company in Shenzhen that handles Chinese goods sold on platforms such as Inc., said his company has 20 to 30 containers on the ships waiting to cross the blocked canal.

“If it can’t be resumed in a week, it will be horrible,” said Ma. “We will see freight fares spike again. The products are delayed, containers can’t return to China and we can’t deliver more goods.”

Detouring ships doesn’t seem like a viable option at the moment, due to risks of taking unfamiliar routes, limited supply to the crew and an extended shipment time. “What if the canal got cleared in 8-10 days? You lose even more time,” said Ma.