The Ever Given is no longer blocking the Suez Canal, but the ramifications left behind in its wake will be felt for weeks and months to come. During the week-long problem, over 400 vessels were scheduled to move through the canal. Some vessels were rerouted around Africa via the Cape of Good Hope and will add two weeks to their transit time, plus significant fuel costs. Others were turned around when the canal reopened and are heading back to take their place in line with other vessels queuing up.
It will take another week or more for the canal transits to return to normal. It is another story altogether, for the ports around the world that are served by the Suez Canal. They could feel the impact for months to come.
When world commerce grinds to a halt, the most critical impact is on flow of goods. Vessel schedule integrity is the first to go. This leads to void sailings, in some places and vessel bunching, in others. The terminals are not equipped to handle the surges, and in turn bog down, while putting extreme pressure on infrastructure. We were already experiencing a smaller version of this at U.S. West Coast ports in past months, where containers are still buried at terminals, awaiting rail movement. When the terminals are overrun with containers, empty returns are rejected causing a two-prong ripple effect, depleting chassis pools and preventing empty returns to Asia. We have been feeling the resulting equipment shortage in Asia due to West Coast issues that will now be compounded with the Suez delays.
The 20 to 40 containerships at anchor on the West Coast these last few months, account for up to 500,000 TEUs (twenty-foot equivalent containers) awaiting discharge, but that pales in comparison to the 1.5 million TEUs now delayed as a result of the Ever Given. Some ocean carriers say the impact has reduced their capacity by up to 30 percent in the short-term. Others are already predicting severe congestion in European and U.S. East Coast ports served by the Suez Canal. We were already struggling in the midst of the longest sustained peak seasons ever, that will now have additional vessel bunching, which will result in longer lines, container shortages, rail shortage, and chassis shortages at these ports.
This translates into one of the greatest upheavals we have ever seen for ocean transportation, and unfortunately for consumers, a perfect storm that will result in increased transportation rates. Ocean carriers on all East-West trade lanes are now in a position to pick and choose the cargo they can transport, with off-schedule vessels reducing their capacity, and a worldwide shortage of containers to move the cargo.
Many carriers are rejecting regular bookings at this time and only accepting bookings under their premium programs. Space has never been tighter and freight rates are poised for rapid increase on most East-West trade lanes. This is expected to be the case for the next several months to come.
If you have questions on how this may impact your shipments, please reach out to your Mohawk Global representative.
