One of the world’s largest container ships, the Ever Given, has been wedged across the Suez Canal since it was blown off course by high winds in the early hours of March 23, blocking one of the busiest maritime trade corridors in the world. The Japanese owner of the ship apologised and claimed dislodging the ship is proving extremely difficult. Marine and salvage engineers failed in their latest attempt yesterday and according to the latest reports, it might take until at least Wednesday.
The incident has already created a logjam of hundreds of tankers and the delay will just amplify the disruption to global supply chains for everything from oil to grains to cars.
While many in Europe are underestimating the accident, the head of Oxford-based think-tank Euro Intelligence Wolfgang Munchau claimed it actually constitutes a “major macroeconomic shock for Europe”.
He wrote: “Germany reminded us that 9 percent of its exports go through the Suez canal, and a much bigger proportion of its chemical trade.
“As we saw at the beginning of the pandemic, industrial supply chains are sensitive, even to small disturbances in transportation infrastructure.
“And this is a big disturbance.”
What makes the situation worse, he noted, is that air transport cannot take up the slack, while demand for Asia-made products is high.
Mr Munchau noted: “This will be a V-shaped shock no doubt, but coming at a time like this, it is the last thing the trade-dependent European economy needs. “
According to Daniel Harlid, a vice presidency at Moody’s, auto and manufacturing sectors are the ones that will suffer the most across the continent.
He explained: “While the impact of the Suez canal blockage on individual sectors is hard to quantify, we expect Europe’s manufacturing, auto and auto suppliers to be most affected because they operate ‘just-in-time’ supply chains.
“This means they do not stockpile parts and only have enough on hand for a short period, and source components from Asian manufacturers.
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“Even if the situation is resolved within the next 48 hours, port congestion and further delays to an already constrained supply chain is inevitable.”
He added: “For container shipping, the effect is credit neutral though carriers diverting their vessels around Africa instead of going through the Suez Canal fuel will see costs rise.
“Spot freight rates will also most likely increase or at least stop decreasing from their currently very high levels.”
The accident comes a few weeks after it was announced that trade between the UK and the EU was hammered in the first month of their new post-Brexit relationship, with record falls in British exports and imports of goods.
British exports to the EU, excluding non-monetary gold and other precious metals, slumped by 40.7 percent in January compared to December, the Office for National Statistics said at the beginning of March.
Imports fell by 28.8 percent — another record.
The ONS said that COVID-19, which left Britain under lockdown measures in January, made it hard to quantify the Brexit impact from new customs arrangements, and there were changes in the way data was collected too.
But there were still signs of a Brexit hit.
Trade in chemicals was weak, reflecting the winding-down of a rush to stockpile pharmaceuticals ahead of the end of the Brexit transition period.
The ONS noted a 64 percent fall in exports of food and live animals to the EU — including shellfish and fish.
It pointed to delays caused by red tape reported by the Scottish Seafood Association, with consignment sign-offs reportedly taking six times longer.