Just how important is the Suez Canal to global trade?

TORONTO —
On Tuesday, a massive 59-foot-wide container ship named the Ever Given rammed into the bank of the Suez Canal in Egypt – a passage that sees 10 per cent of the worlds commerce pass through it every year.

Now, a logjam of ship traffic comprising of more than 200 vessels sits outside the canal, a maritime mess that can be seen from space.

For many, the plight of a ship stuck in the mud in a canal half the world away may not seem worthy of international headlines. But the blockage of such an important international trade route means the domino-effect ramifications of the Suez Canal being out of service could have far-reaching consequences.

The blockage is delaying and preventing shipments of consumer goods from Asia to Europe and North America, and agricultural products moving in the opposite direction, according to CNN Business.

Coffee companies sounded the alarm on Thursday, citing curbing of shipments of robusta coffee, the type used in instant coffees. Europe will be most affected by this shortage because all the beans they import from East Africa and Asia from producers like Vietnam go through the Suez Canal, a trade route that was already affected by the container shortage.

The container shortage also means there is potential for a second toilet paper shortage, as mass wood pulp producers like Brazil struggle to find cargo vessels to ship their products – meaning international product shipment delays.

Global supply chains were already stretched thin from the impact of COVID-19 on the shipping industry, and now the nearly 19,000 vessels the Suez Canal hosts every year have to attempt to figure out alternative routes – most likely at great cost, and raising the prospect of higher inflation.

White House press secretary Jen Psaki described the canal as a key international route for oil, and told reporters on Friday that the White House does “see some potential impacts on energy markets.” Natural gas prices have already increased since the news broke of the blockage.

Professor of operations management at the University of Toronto’s Rotman School of Management Opher Baron spoke on CTV News Channel Friday,  seconding Psaki’s assessment.

“The first part of the impact is something that we feel simply by looking at gas prices,” Baron said. “Oil prices went up by five per cent since the accident happened. The other thing…is a blockage of major commercial routes for shipping and that creates delays. Luckily for us in North America this is less critical than for those in Europe, the Middle East and Asia.”

Baron said the short term effects for both importing and exporting countries will be complications with finding alternate routes, and waiting longer for goods to arrive.

“Basically you need to go around Africa, you need to go around a continent. Its extra time for shipping companies, its also costly – the extra gas that you need, and it puts an extra load on these [alternate] shipping lanes,” he explained.

Officials estimate it may take more than a week to dislodge the Ever Given, with warnings about possible structural problems on the ship as it remains firmly stuck with all its cargo still on board.

Tugboats, dredgers and construction site diggers have all been seen working in tandem to try and remove sand and mud from under the ship to free it, with little success thus far.

Two additional tugboats are expected to arrive at the canal on Sunday to assist.

The White House has offered to help Egypt open the canal, with press secretary Jen Psaki stating that the Biden administration is “consulting with our Egyptian partners about how we can best support their efforts.”