Suez Crisis Highlights Fragility of Global Supply Chain

in Trends by

First came the pandemic in 2020, something that roiled shipping and disrupted the supply chains in and out of China, which soon spread out to the rest of the world like wildfire. And then came one of the biggest hurdles the logistics industry has faced in years, the closure of the Suez Canal, dubbed by some as a ‘crisis’ and rightly so.

An estimated 12% of the world’s trade passes through the Suez Canal daily, representing almost $10 billion in trade on a good day as per Llyod’s List. Serving as the link between rising Asian powerhouses and relatively wealthier Europe, it is undoubtedly the most important waterway in the world.

Coming to number games, 50 ships transit the Suez every day. In 2020 alone, almost 19,000 vessels with a net tonnage of 1.17 billion tonnes transited the 190 km long waterway, making it the second-highest load in the history of the Suez.

The pandemic in itself had exposed the fragility of the global supply chain, with container shipping rates having tripled as shipping companies cut down on fleet capacity, expecting falling demands. That and the ongoing container shortages due to a phenomenon called container repositioning, has caused a headache for shippers and consumers alike.

Even though the worldwide logistics industry has amassed a high degree of efficiency when it comes to manufacturing goods and adhering to tight schedules, as well as keeping shipping costs to the minimum, if the Suez Canal closure would have been prolonged, it could’ve had a cascading downstream disruption of trade with vast economic repercussions.

In simple words, consumers like you and me would’ve had to shell out more on everyday goods, ranging from your Amazon order to gas for your vehicles.

The Suez Canal, along with the Panama Canal form two of the most critical canals in the global maritime domain, coupled with the Volga-Don and the Grand Canal (China). Other such maritime chokepoints exist in the Strait of Malacca in Singapore and Malaysia, as well as the Strait of Hormuz in the Middle East.

Sandwiched between the Persian Gulf and the Gulf of Oman, the Strait of Hormuz is the only sea passage connecting the Persian Gulf to the open ocean. The Strait is a logical flashpoint for geo-economic gamesmanship for major OPEC countries due to its location and strategic value for so much of the world. It carries around 20% of the total traded oil in the world.

Roiled by tanker seizures and regional forces grappling for power in the Middle East, supply chains have often been disrupted in Hormuz as well. Coming back to Suez, the net losses incurred per day amount to $9.6 billion. When the canal was finally freed on Mar 29, an estimated 494 vessels were stuck in the queue (both berthed + in the canal).

The Canal authorities increased traffic to clear the backlog. Around 1,068,310 TEUs were involved in the backlog. Have a look at our graphs showing the number of crossings by day and vessel type.

The queue of hundreds of ships that built up around the Suez Canal has been cleared during the first week of April, according to Egyptian authorities.

The final 85 ships passed through the waterway on Apr 3. On the Facebook page of the Suez Authorities, they added that the operation demonstrated its ability to manage emergencies.

When ULCC Ever Given blocked the Suez Canal for days the global maritime supply chain was put at risk. Use Live-Tracking solutions by FleetMon to keep track of your freight.