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The Suez Canal Blockage Costs $400 Million An Hour: Here's How It Will Impact Business Worldwide
The Ever Given incident has blocked one of the world's busiest trade routes, showing us just how fragile the global shipping industry is.
The 220,000 mega-container vessel, Ever Given, got wedged in a section of Egypt’s Suez Canal on Tuesday, costing an estimated $400 million an hour in goods. The blockage caused a traffic jam of 200 vessels waiting for the path to clear with another 100 vessels on their way to the Canal today.
The Suez Canal sees about 12% of all trade, making it one of the busiest trade routes in the world. Normally, about $10 billion in trade traffic flows through the canal, which means that this blockage costs an estimated $400 million per hour in goods.
Efforts to free the vessel so far have failed, but Egyptian officials insist it will be free by the weekend.
Jon Gold, vice president of supply chain and customs policy for the National Retail Federation, told CNBC, “Every day that the vessel remains wedged across the canal adds delays to normal cargo flows. There is no doubt the delays will ripple through the supply chain and cause additional challenges.”
The Impact on Global Trade and Business
The blockage will impact almost everything from consumer goods like clothing and gym equipment to energy supplies like natural gas and refined oil. For each day that the canal remains closed, another 3 to 5 million barrels of oil (mainly from the Middle East to Europe) are also delayed. Crude oil prices are already on the rise worldwide.
Some vessels, not wanting to wait for the blockage to clear, have re-rerouted to go around the horn of Africa, adding another seven to nine days of an already delayed trip.
According to CNBC, the World Shipping Council advised that it clearing the backlog from the delay in the canal will take just as long as the delay was itself.Situations like this not only delay the delivery of those goods, leaving store shelves empty and consumers frustrated, but it also prevents the delivery of empty containers to China, which further delays exports.
Teams continue to work to free the Ever Given vessel as quickly as possible, and the Suez Canal Authority has signaled it will accept international aid from the U.S. to expedite the process.
