2021-03-27 18:44:47
An excellent read from Ajay bagga on the suez issue. How it is affecting demand supply and what will be the impact.
How much is the epic traffic jam in the Suez Canal costing the world?
The short answer: a lot.
The Ever Given ran aground Tuesday, blocking $10 billion of oil and goods that sail through the passage on a typical day.
The charterer of a very-large crude carrier is racking up charges of between $30,000 to $80,000 a day to park the tanker off Suez waiting for the canal to open.
The cost to ship a 40-foot container from China to Europe has climbed to about $8,000, almost quadruple the figure a year ago.
Earnings for very large crude carriers, or VLCCs, hauling oil from the Middle East to China rose to $1,371 a day, registering a profit for only the second day in more than seven weeks. And that route isn’t even affected by the logjam in the Suez Canal.
Suezmax vessels, which typically carry 1 million barrels of oil, are now getting about $17,000 a day, the most since June 2020.
Caterpillar Inc., the U.S.’s largest machinery producer and one of the biggest in the world, is facing shipment delays due to the Suez Canal blockage and is even considering airlifting products if necessary.
Shippers weighing the cost of rerouting their vessels around Africa. It’s not easy . Sailing around the Cape of Good Hope adds 6,000 miles (9,650 kilometers) to the journey, and fuel costs alone would be about $300,000 for a supertanker delivering Middle East oil to Europe.
Swedish furniture giant Ikea and yellow bulldozer-maker Caterpillar Inc. typify the supply-chain headaches facing international companies due to the massive container ship blocking the Suez Canal.
Seabay International Freight Forwarding Ltd., a company that handles Chinese goods sold on platforms such as amazon Inc., has 20 to 30 containers on the ships waiting to cross the blocked canal, according to owner Mark Ma.
The crisis comes as companies were already battling the strain of adapting supply chains to cope with a pandemic-related e-commerce boom, while Covid-19 regulations at ports are slowing the passage of some products.
While A.P. Moller-Maersk A/S and Hapag-Lloyd AG are considering sending ships around Africa to avoid the gridlock, Seabay’s Ma said detouring ships may not be a viable solution, due to risks taking unfamiliar routes and extended shipment times.
Cargo-market disruption were already playing havoc on global trade, especially for food and agricultural products. Port traffic has gotten snarled, freight costs have gone up and deliveries have slowed.
The container crisis, sparked by huge demand from China, has been playing out for months. If the squeeze continues to increase freight costs, it also raises the specter of accelerating inflation.
Almost 300 vessels have queued up, compared with 238 on Thursday, according to Bloomberg data. About 12% of world trade passes through the canal each year, everything from crude oil to grains to instant coffee.
Suez Canal is a major money-earner for Egypt’s government, generating $5.61 billion in revenue last year. An $8 billion expansion of the canal was launched in 2015 with the goal of increasing ship traffic and more than doubling revenue.
Oil prices jumped on Friday, amid speculation that dislodging the ship could take weeks. West Texas Intermediate crude futures and Brent crude each advanced more than 4%.
Of the 39.2 million barrels per day of crude imported by seaborne methods in 2020, 1.74 million barrels per day passed through the Suez Canal, according to data from research firm Kpler.
Even after the ship is dislodged,the impact will continue.Ships will arrive at ports simultaneously creating new traffic jams.Cargo schedules created months in advance wont work,with ships now in the wrong place.There’s a lack of visibility in the entire supply chain.
The disruption caused by the backlog in the Suez Canal comes as global supply chains are already strained by Covid-19 with shortages of equipment,of space, and key components.
1.0K viewsedited 15:44
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