Gridlock on the high seas

Market insights | 26th March 2021 | By Andrew Whitelaw

Market Morsel

Earlier this week I had discussed the increasing costs of containers (see here). In this piece, I discussed the increasing speed of container ships. I spoke a little too soon, and a day later, the Suez Canal became blocked by a container ship the 400 metre, Ever Given.

The Suez Canal blockage is major, as this route is one of the most important in the world. It shortens the distance of goods from the east to the west (and vice versa). The alternative is to take vessels around the cape of good hope (Southern tip of Africa), which is a considerably longer voyage.

While Ever Given is a container vessel, many other vessel types are stuck in the congestion from oil tankers to bulk vessels. Around 50 ships transit the canal each day, so getting this vessel unstuck is of paramount importance.

Let’s have a look at the impacts:

Wheat & barley: We don’t send huge volumes of wheat & barley through the Suez Canal. The blockage going into the Mediterranean is unlikely to have a significant impact on our trade flows.

The effect is, however, likely to be felt by our competitors from the black sea region. There are large volumes of wheat and barley that go through the canal. If the delay in moving the vessel goes into weeks rather than days, it could cause some issues.

Canola: We do reasonable export volumes of canola into Europe. This season, we have shipped canola to Belgium, UK, Denmark, Portugal & Germany. There may be delays to some of our exports into Europe.

The reality is that impact of this traffic jam will only be temporary and only likely to impact trade flows for a short period. At the moment there are 147 bulk vessels at the Suez Canal.

Bulk vessels at Suez Canal