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Supply chains braced for “one of the biggest disruptions to global trade” in years

Supply chains braced for “one of the biggest disruptions to global trade” in years
Satellite image of the Suez Canal on March 25, Credit: BlackSky

After six days the Ever Given is on the move, although the blockage of the Suez Canal means that container supply chains, which were already strained by port congestion and equipment shortages, will face disruption in the weeks and months ahead.

Estimates of how long it will take to clear the current backlog of 300 vessels at the Suez Canal range from four days to six days or more.

All three shipping alliances have diverted vessels via the Cape of Good Hope, a journey which can take up to an additional ten days, while adding fuel costs.

These include Evergreen’s Ever Greet, which operates on the same China-Europe-Mediterranean service that the Ever Given was sailing on, which was due to sail from Malaysia to the Suez Canal, but is instead heading south.

Caroline Becquart, senior vice president and head of Asia and 2M service network at MSC, said: “There’s no doubt that the current Suez Canal blockage is going to result in one of the biggest disruptions to global trade in recent years and we are working around the clock to manage our fleet and services so we can keep cargo moving and keep trade flowing as best we can under the circumstances.

“Sailing around the Cape of Good Hope is an option on some routes, while in other cases it’s more about working closely with our customers to see what other solutions we can devise. Unfortunately, even when the canal re-opens for the huge backlog of ships waiting at anchorage this will lead to a surge in arrivals at certain ports and we may experience fresh congestion problems.”

Becquart added: “We envisage the second quarter of 2021 being more disrupted than the first three months, and perhaps even more challenging than it was at the end of last year. Companies should expect the Suez blockage to lead to a constriction in shipping capacity and equipment, and consequently, some deterioration in supply chain reliability issues over the coming months.”

As of Monday March 29, Maersk and its partners have three vessels stuck in the canal and 30 vessels waiting to enter the canal, with more expected to reach the blockage. Meanwhile, the carrier has redirected 15 vessels around the Cape of Good Hope at the southern tip of Africa.

A Maersk statement noted that the decisions to divert vessels were made “close to the point of no return” and it is expected that they will continue via the south of Africa, also to reduce the number of vessels in the queue at the canal.

Six services from THE Alliance have also been diverted around the Cape, of which four are eastbound and two are westbound.

Jan Tiedemann, senior analyst, liner shipping and ports at Alphaliner, told CM: “The conundrum for carriers is that the decision point for taking the Suez Canal or the Cape route is so far out that there’s a risk you make the wrong decision. For Asia to Europe, you need to decide after leaving Singapore and vice versa, it’s at the Gibraltar straits.”

He also pointed out that the alliances typically have 11-12 vessels on an Asia-Europe loop roughly spread out at one week intervals. Therefore, an approximate one week delay caused by the diversion around the Cape effectively reduces capacity by 8-9%.

He noted: “Either you need an extra ship to cover the same number of voyages or the ships slip back one week in their schedules.”

On an encouraging note, he believes that the European port network has the flexibility to be able to handle the likely spike in vessel calls when a host of diverted and delayed ships eventually reach their destinations.

Tiedemann added: “Unlike in Los Angeles and Long Beach where vessels often visit and then head straight back to Asia, sometimes via Oakland, the typical ship will have five or six European calls so you can shuffle them around to a degree. You also have feedering options and barge and rail are available too.”

Regarding the potential port call chaos, Simon Heaney, senior manager – container research at Drewry, told CM: “The smooth operation of ports is facilitated by planning. If you have less visibility in terms of how many ships are about to berth, that’s going to make planning harder for ports.

“The danger is once those ships are released, they all come at once and create another massive peak that the ports and terminals aren’t able to cope with. It’s going to take a lot of dialogue between shipping lines and ports about how they best manage that.”

Meanwhile, Mawani, the Saudi Ports Authority, has announced that vessels at the southern end of the canal on the Red Sea coast can use Jeddah Islamic Port for ship transfers and container offloading.

In particular, the period of exemption from storage fees for transhipment containers has been extended from 30 days to 60 days.