Suez Canal: World Trade Woes Grow

The accident of the ferocious cargo-ship named “Ever Given in the Suez Canal last week reminded us how crucial the maritime trade corridors and especially those maritime trade corridors that unite Europe and Asia are. The Suez Canal.

The timing of the accident is bad since it coincided with the hardships suffered by world trade more than a year after the Covid-19 pandemic. With the “Ever Green” stranded on the Suez Canal, more than 35 ships gathered waiting to cross the canal, most of them tankers carrying fuel.

by Thanos S. Chonthrogiannis

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This was also the reason why the price of oil – the non-timely delivery of ordered cargoes – increased significantly due to the lack of supply.

Delays will have unaffordable costs for businesses with fare prices rising for shipping companies. Lloyd’s Insurance says that with a short calculation the cost of not delivering the products on the predetermined date is set at $9.6bn for each day of delay.

If the ship needs weeks to detach, then we can get a picture of the damage. For business. The detachment of the ship is difficult to achieve because 20000 cubic meters of sand must be moved from the specific point of the Suez Canal, so that the depth that will be opened will allow the ship to move.

The alternative maritime trade route is for ships to tour Africa from the Cape of Good Hope, as was the case in the past before the Suez Canal opened.

This sea route extends the journey by 3500 miles or 12-15 days and depending on the load and state of the sea that the ships will encounter. This extension of travel translates into an increase in fuel consumption of 800 tons, when fuel accounts for 60% of the operating costs of ships. This will drive product prices higher than they are today.

In addition, the obstruction of maritime trade routes has highlighted the role of the storage facilities that each company must have to fuel market demand with its products incessantly for at least a period of two months. In this case they would not be concerned about the increased cost of any late delivery.

Businesses are therefore given the opportunity to gain knowledge of such an accident by investing capital in the development of storage facilities in the markets they operate in so as not to experience such cost increases as was the case with the closure of the Suez Canal.

The tendency of companies to reduce their costs by ordering their products at the last minute online is partially correct if for any reason the delivery of their products is not delayed. Otherwise, they get into trouble.

 

 

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