The ship saga in the Suez Canal looks a step closer to ending in days rather than weeks. The bad news is it might be just the start of more longer-term problems that will make global trade even slower and costlier.
The container ship Ever Given was partially freed from her earthen berth Monday morning in Egypt, and refloat maneuvers are continuing. Nearly 450 vessels are waiting on either side of the canal for it to reopen. Ballpark guesses say the backlog may take a week to clear. According to an estimate from Hayfin's maritime team, it may take 12 days.
The wider fallout awaits ports and other recipients of the delayed cargo. Some vessels are already a week late carrying goods between Asia and Europe, meaning short stopovers along the way may be skipped and return trips could be scrapped, too. Before the incident, there was hope ocean carriers that haul some 90% of global merchandise trade would be able to rebalance their tight container capacity with demand over the next few months, but that looks tougher to do now.
Regardless of when traffic starts flowing normally again, "it couldn't have come at a worse time in global trade," said Sanne Manders, chief operating officer of freight forwarder Flexport. "The blockage will only worsen existing global equipment shortages, port congestion and schedule reliability issues."
Manders estimated that the canal's closure took the equivalent of nearly 500,000 20-foot containers out of the market — roughly the same impact as when the major carriers slashed capacity a year ago on expectations that consumer demand would plunge in the pandemic.
So any 2021 rebalancing act may have to wait another few months.
"The metaphorical dominoes have already been toppled and 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," said Lars Jensen of SeaIntelligence Consulting. "These ripple effects will take several months to be fully worked through."
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement