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$400-Million-an-Hour Suez Canal Snafu Heightens Importer Woes

In the latest headache for importers, ultra-large container ship MV Ever Given Evergreen ran aground Tuesday and blocked all traffic attempting to sail through the Suez Canal.

A report from Everstream Analytics said the accident is already causing considerable impacts on global supply chains and the passage of critical goods, oil, chemicals, grains and other commodities products worldwide. Fortunately for apparel importers bringing in goods from Asia, the vast majority of containers arrive through the West Coast such as the twin ports of Los Angeles and Long Beach.

The MV Ever Given was carrying goods from Yantian, China, to Rotterdam, Netherlands before suffering a power outage while moving north. The Suez Canal Authority said the positioning of the container ship has blocked all traffic.

According to Everstream, around 185 vessels have already been affected–mostly bulk carriers, container ships and oil or chemical tankers.

Nate Herman, senior vice president of policy for the American Apparel and Footwear Association, said the trade group hopes the “potential for a weeks-long Suez Canal blockage” is “resolved in short order.” However, AAFA expects to see Africa and Middle East imports directly affected by the canal crisis, he added.

“At the same time, the spikes in shipping costs and shortage of containers continues at the Port of Los Angeles and Port of Long Beach–where 40 percent of apparel and footwear imports cross into the U.S.–continues to create total havoc and extensive delays,” Herman told Sourcing Journal. “On that front, we are in coordination with the Federal Maritime Commission and Congress to seek a resolution on the crisis.”

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The world’s largest container ship carrier, Maersk, said Thursday that so far, nine Maersk container vessels and two partner vessels have been directly affected. The company said efforts are being made to move all northbound vessels out of the canal to facilitate a clear passage and continuous convoys when the Ever Given vessel has successfully been released.

“While ETAs are jeopardized as salvage efforts continue, the impact on the global supply chain as a result of the vessel blockage in the Suez Canal depends on how long the route remains impassable,” Maersk said. “We are closely following the refloating operations and will do our utmost to mitigate the delay as best as we can.”

Everstream estimated the economic impacts of the blockage could be up to $400 million an hour. The Suez Canal is one of the world’s most critical maritime shipping routes and is widely considered a major choke point for global trade, Everstream noted. About 30 percent of the world’s shipping container volumes transit through the route daily and account for around 12 percent of total global trade of all goods.

“The Suez Canal blockade could further exacerbate excessive congestion at European ports if cargo were to arrive all at once, as well as persisting container shortages in Asia that have led to surging freight rates, should the situation continue to worsen,” Everstream’s report said. “If the situation were to continue to prevail, it could have an outsized impact and create bottlenecks at European ports as soon as next week, while at the same time risking delays for the return of desperately needed containers in China.”

Jon Gold, vice president of supply chain and customs policy for the National Retail Federation, said the blockage “is contributing further stress to an already strained supply chain.”

“Every day that the vessel remains wedged across the canal adds delays to normal cargo flows,” he added. “Many companies continue to struggle with supply chain congestion and delays stemming from the pandemic. There is no doubt the delays will ripple through the supply chain and cause additional challenges. NRF members are actively working with their carriers to monitor the situation and determine best mitigation strategies.

Meanwhile, West Coast port bottlenecks have been said to have eased somewhat in recent weeks. The Port of Los Angeles processed 799,315 20-foot equivalent units (TEUs) in February, a 47 percent jump compared to February 2020.  It was the seventh consecutive month of year-over-year increases and the strongest February in the port’s 114-year history.

“One year ago, global trade slowed to a crawl as the COVID-19 pandemic first hit China and then spread worldwide,” Port of Los Angeles executive director Gene Seroka said last week. “Today, we are in the seventh month of an unparalleled import surge, driven by unprecedented demands by American consumers. Our challenges now are focused on getting port workers vaccinated and assisting stakeholders in managing this heavy flow of cargo. We will do everything we can to help get shipping lines back on schedule. It’s critical that we clear the backlog of cargo and return more certainty to the Pacific trade.”

According to the monthly Global Port Tracker from the National Retail Federation and Hackett Associates, cargo imports at the nation’s largest retail container ports are expected to increase significantly during the first half of 2021.

“We basically took a year’s worth of product and jammed it into six months of entry,” Matt Priest, president and CEO of the Footwear Distributors & Retailers of America (FDRA)., said earlier this month. “We’ve just been jamming it through the ports and that’s going to create a lot of challenges, especially when you couple that with the fact that the longshoremen and others have been impacted by Covid like everyone else. It’s the perfect storm.”

Additional reporting by Jessica Binns.