The Suez Canal Crisis: Some Lasting Ripples Aren’t Making Headlines
It came down to physics: a sandstorm, shipping containers stacked too high (believe it or not, they acted like a sail), and a ship too big to spin around.
At the time of this article’s publication, it’s still unclear whether human error by the Ever Given’s captain is also partially responsible for the global shipping crisis caused by the 20,000 TEU container ship’s weeklong “vacation” in the Suez Canal.
Also at the time of publication, the crisis — which ended more than two weeks ago — continues to result in global shipping delays averaging five to six weeks.
I see two main areas where the ripples of the disaster will continue the strongest:
Increased pricing, decreased supply: The carriers are taking advantage of the situation and North American shippers are suffering as their equipment is being sent out empty to regions where the carrier can take a financial position and move those containers at greater profits.
In 2019, shipping industry profits came in at about a dismal -$12 billion. In 2020, they managed to flip it to +$14 billion — that’s not a trend they’re going to let go of easily.
Compounding obstacles: Shippers were stretched even before the Ever Given headed down the canal that fateful day, so adding capacity isn’t a viable solution. The previous problems hampering shippers are now exacerbated.
-The global shortage of shipping containers continues to cause a ripple effect of its own.
-Travel restrictions stemming from the pandemic continue to result in reduced air cargo opportunities.
-The above factors and more continue to overwhelm trucking companies, who face employee shortages and rising expenses.
North American recovery is also hampered by a lack of awareness on the global stage. Many companies headquartered abroad don’t understand the hurdles American vendors continue to face — for example, the price gouging. The United States is one of the only countries where the government doesn’t oversee or own lines of transportation — in most others, it controls or owns at least cargo shipping and airlines — so vendors and logistics companies are dealing with rate hikes. On the other hand, those countries are also at risk of delays caused due to slow-acting governments entrenched in bureaucracy.
CTOs should be concentrating on finding other viable ways for customers to move freight. Plan for a delay of 5-7 weeks compared to your usual shipping estimates, for the foreseeable future. Air freight — despite the delays caused by the pandemic-crippled air travel industry — is probably your best bet for now. You might have to get your CPO and/or client to make some tough decisions based on how eager they are to get their product to market.
Your next priorities are forecasting and having your product line in order. Take note from restaurants and doctor’s offices and build healthy amounts of downtime and lead time into your shipments. At this point in the recovery stage, a strong enough hiccup can still cause a significant backtrack to the progress.
Even though everything is “fixed,” we’re not going back to normal in the near future. In our industry, the pendulum normally has a five-year swing for the upper hand between shippers and vendors. When it comes back down in our favor, it won’t be anywhere near the levels we enjoyed the last time it was our turn.
As Chief Transportation Officer, Carmen Gerace oversees all aspects of global transportation for BDP International, including the implementation of new transport solutions and product offerings while also developing future transport strategy. Throughout his 25+ career in the industry, he has held varying managerial and executive positions at BDP. Carmen is based in Philadelphia, PA, and can be reached at firstname.lastname@example.org.
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