How the Suez Canal blockage could hit product supply chains

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Title : How the Suez Canal blockage could hit product supply chains
Link : How the Suez Canal blockage could hit product supply chains

AP — The cargo ship blocking the Suez Canal is holding up traffic that carries nearly $10 billion worth of goods every day, so a quick clearing of the logjam is key to limiting the economic fallout.

Efforts continued Thursday to dislodge the Ever Given container ship and restore traffic on the critical man-made waterway that connects the Mediterranean to the Red Sea and provides a shipping shortcut between Europe and Asia.

How vital is the canal to shipping?

About 10% of all global trade flows through the 120-mile-long (193-kilometer-long) canal, which allows tankers and container ships to avoid a long trip around the southern tip of Africa.

The iconic shipping journal Lloyd’s List estimates that goods worth $9.6 billion pass through the canal every day. Lloyd’s says about $5.1 billion of that traffic is westbound and $4.5 billion is eastbound.

What effect will this have on supply chains?

When it comes to shipping goods from Asia to Europe, there are virtually no alternatives such as rail or truck transportation, said Sharat Ganapati, an economics professor at Georgetown University. The blockage will delay a range of parts and raw materials for European products such as cotton from India for clothes, petroleum from the Middle East for plastics, and auto parts from China, he said.

“The fact that you have the most pivotal node in the trading network being blocked is going to have important welfare effects around the world,” said Woan Foong Wong, an economics professor at the University of Oregon. READ MORE