The ship has been un-wedged! After nearly a week stuck in the Suez Canal, a fleet of tug boats, a digger, and a crack team of salvage experts refloated the monstrous Ever Given container ship.
The ship has been un-wedged! After nearly a week stuck in the Suez Canal, a fleet of tug boats, a digger, and a crack team of salvage experts refloated the monstrous Ever Given container ship.
It might be free, but it's hardly business as usual. The disruption is set to reverberate around the world for many months, and it's a hangover that looks set to find its way to importers everywhere. As Covid highlighted, global trade and infrastructure is being pushed to the limit and disruptions can have a domino effect that reaches to all corners of the globe.
In today's Epic news, we recap the Suez situation and look at the economic impact.
What happened?
At 400m long, the Ever Given is one of the largest container ships ever built. So big in fact that it could block up the Suez Canal. Which it did. High winds and a sandstorm have been blamed for the mishap, although there is speculation that human error may have played a part. The result was a week-long and very expensive traffic jam that ran up a bill estimated to be in the billions.
Thanks to its extreme meme-ability, and the public's fascination with stories that involve someone messing up really badly at work, just about everyone on earth heard about it. There was something very human and almost comedic about the situation.
Why was it such a big deal?
As far as shipping is concerned, the Suez is the world's greatest man-made shortcut. Around 12% of global trade makes its way through the canal, which is the shortest sea route between Asia and Europe. Blocking the canal stopped the flow of an estimated US$12 billion in goods. Cars, shoes, beers, oil, and lots of other important stuff got stuck at the mouth of the canal on over 150 ships.
Delays were felt for everything from shoes and cars, to gym equipment, electronics and food. The canal is a particularly important route for the transport of oil and gas from the Middle East to Europe, so energy markets were also affected.
The most immediate effect was on shipping rates. As the blockage further squeezed an already stretched global supply chain, spot freight rates began to rise quickly. Shipping rates had nearly doubled by the time the boat was freed.
As the backlog got cleared through the Suez, congestion at major ports throughout Europe also occurred. Ships found they had nowhere to dock and unload their cargo. It was another layer of stress on a system that had been severely tested over the previous year.
Impact for UK importers
News of the Suez blockage was met with understandable concern from importers and exporters in the UK. Fresh off a difficult year, the business community knows well how international events often have a domino effect.
Although most consumer goods that pass through the Suez Canal are destined for China or Europe, it's very likely that raw materials were destined for products that would eventually reach UK consumers. Consumers were unlikely to find empty shelves at their favourite stores, but delays could mean specific products weren't in stock.
From a sourcing standpoint, importers stared down the barrel of increased shipping rates. Here at Epic we saw shipping rates increase significantly, though there was hope things would ease as normal operations resumed.
So, there you have it. Some good news, some not very good news. The Suez Canal catastrophe showed once again how fragile global trade can be, but it also showed that in times of trouble, extraordinary things can get done.
Cheers!
TK
