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Salvagers Unstick Suez Ship, But $10B in Lost Trade Still at Stake

Following the disruption that cost the global economy an estimated $400 million an hour, ocean freight carriers and supply chain executives were breathing a sigh of relief Monday after the Suez Canal Authority said Evergreen’s Ever Given mega container ship was dislodged, fully floating and expected to be moved to the Great Bitter Lake, freeing vessels to once again navigate the critical ocean trade route.

Douglas Kent, executive vice president of strategy and alliances at the Association for Supply Chain Management (ASCM), said the supply chain and shipping industry would now start to take a closer look at what can be done to build resiliency and transparency to prevent such catastrophic results in the future.

“The most immediate situation is resolved and faster than most people thought, but the knock-on impact is already there,” Kent told Sourcing Journal. “We have ships, we have containers and we have goods all where they’re not supposed to be. So, the recovery process is going to much longer than it was getting the ship moved.”

He said the biggest concern is not the most immediate recovery, like “taking the long way around, that’s going to take seven to 10 days of travel time,” but then the follow-on port congestion in Europe.

Kent said while U.S. ports likely didn’t have any immediate impact, “the container problem is bigger than the ship problem.” He noted that these containers that have been stuck should have already been at their destination and rerouting back to Asia, which could affect U.S. conditions and cause delays.

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Kent said there is likely to be some anti-globalization sentiment that comes out of the crisis as companies look to avoid risk and see rapid recovery when crises do occur.

While he doesn’t see the apparel industry changing its focus on Asia as its primary source of production as a result of the Suez snafu, the crisis could “impact decisions on insourcing and outsourcing” and increase verticalization.

On Monday, Maersk said once the vessel is safe at anchorage, the ships currently at anchorage in the lake–three of them Maersk vessels–will sail out of the canal in a convoy. The canal could be opened within the next 12 to 24 hours.

“We are monitoring the situation closely, as Maersk and partners have 34 vessels at anchorage waiting,” the company said. “We have until now 15 redirected vessels around the Cape of Good Hope at the southern tip of Africa and we are currently recalculating if some of these vessels should turn around and continue on their original route.”

Jena Santoro, risk intelligence specialist at Everstream Analytics, said there are 367 vessels waiting to pass through the Suez Canal, while countless others have already made the decision to divert course around the southern tip of Africa, an alternative voyage that reportedly adds weeks to the journey and costs upward of $26,000 per day in fuel costs.

“Authorities estimate that clearing the traffic jam of container vessels will take roughly three-and-a-half days and will cost nearly $10 billion in lost trade each day,” Santoro said.

She agreed that while efforts to normalize canal operations are underway, there are several reverberating impacts that can be expected from the nearly week-long ordeal.

“First, air and rail cargo rates out of Asia to Europe could rise again as shippers seek to use alternatives modes of transportation, with still limited capacity,” Santoro said. “Next, container lines have started to implement booking stops for the first two weeks of April due to the uncertainty of when ships will make it through the Suez Canal, pushing more shippers to alternative modes of transport such as air and rail. Last, already congested ports in Europe–such as Antwerp, Rotterdam and Felixstowe–could face long delays due to the simultaneous arrival of vessels.”

As ships are likely to be diverted to alternative ports to gain time with the unloading process, further delays of import and export cargo can be expected, she also noted. Those with shipments and goods that are stuck on vessels waiting at Suez or diverting around of the Cape of Good Hope can send critical material via air, rail or truck out of Asia to Europe where possible and necessary, Santoro advised.

Alternatively, containers that are already on their way out of Asia can be unloaded at large transshipment ports such as Singapore or Dubai and then flown.

“If possible, critical materials should be sourced from a different supplier or geographical region until the disruptions have subsided,” he added. “Authorities estimate that the shutdown of the canal has impacted as much as 15 percent of the world’s container shipping capacity. As such, reversing such impacts will take some time and require strategic adjustments be made by those operating in maritime freight.”

A Flexport blog summed up the situation: “As unrelenting demand continues, super stacks of containers will keep pushing their way across the world–sometimes, at any cost.”