Disruptions to global trade intensify in some key ports after the Suez Canal crisis
Industry sources disclosed some ports are contending with the backlog from the Suez Canal, putting the world trade in further distress. Companies were compelled to ship by rail to meet the delivery deadlines.
More losses expected
Over 400 vessels were in limbo when the Japanese-owned Ever Given was beached for a week, and freed with specialist rescue teams. The disaster caused numerous companies to suffer losses by the millions uncovered by insurance. Reiner Heiken, chief executive of Hellmann Worldwide Logistics said, “The blockage of the Suez Canal will increase the negative impact on global supply chains in the coming weeks, as the availability of empty equipment, particularly in Asia and Europe, will be affected.”
The retail sector is trying to recover from the dramatic sales decline from the pandemic. Shipping companies carrying products ranging from mobile phones to designer goods contended with the disruptions for months due to the pandemic, plus a subsequent demand surge resulting in wider logistical bottlenecks in top consumer market such as the United States for instance.
Transporters struggling to meet delivery deadlines were compelled to use rail as an alternative. Unfortunately, this option made minimal difference to smoothen world trade – given 90 percent is facilitated by sea. The bottleneck triggered European and American retailers’ worries about possible supply issues stemming from the Ever Given’s incident. Port officials in Europe’s leading gateways said the impact would be felt in the coming days, adding to already stretched supply lines.
Anticipating port congestions
In Belgium, Barbara Janssens from Port of Antwerp said the port and terminal operators were “already preparing for what is ahead”. “The impact on global supply chains is expected to last for several months. There is not enough spare capacity across the worldwide container ship fleet to help counter the worst effects from the Suez incident,” she added.
From the port of Rotterdam in Netherlands, Leon Willems said it expected its container traffic to be around 10 percent higher than normal in the coming weeks. He added, “Both the port and container terminals are doing everything they can to minimise disruptions.”
Maersk, the world’s top container line, said in a note that vessels held up in Suez would be delayed for days before arriving at the U.S. East Coast ports. In an unusual step, Maersk urged the ports “to take this opportunity to clear cargo from terminals which will allow them to operate more efficiently”. Though the East Coast Port of Newark reserved comment, a source at the southern U.S. port of Savannah said they expected to clear a backlog of ships in the coming days.
American ports more vulnerable
While ports on the U.S. East Coast are more prone to the impending backlog, the surge in demand for retail goods overwhelmed West Coast terminals in recent months. This is underscored by project44’s analysis which revealed container ships face longer waiting and discharging times at West Coast ports than in other ports worldwide. Project 44 is a Chicago-based logistics platform.
Eugene Seroka, executive director of the Port of Los Angeles, said they were making progress with the backlog, expecting it to be cleared by the end of May or early June. Mario Cordero, executive director of neighbouring Long Beach port, also expected to reduce their backlog by summer. “However at least the next couple of months, we expect a continuing surge on the volume that we are seeing,” he added.
Shipping by rail
The prospect of Suez Canal’s domino effect is not new. Although the disruption did not cause a significant impact on shipping operations between Europe and Hong Kong, Hong Kong’s Transport and Housing Bureau said the government was monitoring the situation. However, transporters turned to rail links between China and Europe to distribute critical supplies, although users stressed volumes were small.
Journey times via the rail, which runs from China through Kazakhstan or Mongolia to Russia, followed by freight centres across Europe, typically take between 16-18 days compared to four weeks by sea and under a week by air. Danish companies DSV, GVT and Maersk observed a surge in rail freight interest between Europe and Asia. “Land transport between Asia and Europe will always be able to cover only a small share of the total transport volume,” Heiken said.