Suez Canal Blockage & Its Effects To Global Shipping

Although the Suez Canal blockage incident in late of March and early of April has been resolved and the global arterial traffic has been through, however, the chain reaction to the global shipping has just begun to appear.

Some of the obvious affects are listed below:

1. To sea shipping:

Port congestion

Now that the canal has reopened, cargo vessels passing through the waterway will likely arrive at their destinations too close together due to being off schedule. This can cause vessel bunching and congestion at major ports such as Rotterdam and Antwerp.

Although most of the cargo flowing through the Suez Canal moves from Asia to Europe, a remarkable volume of Southeast Asian (Vietnam included) and Indian goods come to the U.S. East Coast via this route as well. Major U.S. ports such as New York will therefore also be hit with congestion as imports begin to arrive.

Container imbalances:

Due to the affect from Suez Canal blockage, the shortage of empty container availability has been an ongoing issue in Asia as demand from both the U.S. and Europe remains high. Cargo ships blocked at Suez are unable to return empties to Asia on schedule and filled containers will be further delayed as ports in Europe and the U.S. work through bottlenecks are some of main reasons causing the imbalance between container supply and demand in the market this period.

In the end of March, Maersk shipping company announced the suspension of booking on the online platform, as well as suspending for short-term contract bookings in the first week of April, and for some other regions in the near future due to the impact of container shortage.

Impact on vessel schedule:

Delayed cargo ships are expected to omit or cancel sailings in the coming days and weeks to bring their schedules back in order, as well as need to re-structure their vessel for new US season from 1st May.

These structural blank sailings will negatively impact capacity, in this case, possibly as much as 20%-30% over the next several weeks, leading to the result of shortage space on ship.

Impact on oil prices and shipping rates:

Around 10% of total seaborne oil trade is estimated to pass through the Suez waterway. On a daily basis, it’s close to 3 million barrels per day. Suez’s also a key route for oil tankers going to and from the Middle East (connecting Europe, the Middle East and Asia.)

This blockage incident has a significant impact on oil prices, and at the same time makes the freight rate increase significantly.

2. To air shipping:

The decrease in transport capacity:

The Suez blockage incident is not only impact on sea shipping, but also has many negative consequences for other transportation methods. Freight forwarders and shippers begun to consider other transportation modes, and airfreight in particular; making the already shortage capacity due to the impact of the Covid-19 epidemic more and more stress and difficulty.

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