The Blocked Suez Canal Is Another Setback For Supply Chains
The Suez Canal has been blocked by a large container ship, but last year's drop in world trade volumes is still the bigger problem for supply chains.
The Suez Canal is blocked by a large container ship 'Ever Given' in Egypt, 24 March 2021 Source: Shutterstock
With supply chains already under pressure, a large container ship has now literally blocked one of world trade’s major routes.
Shipping capacity between Europe and Asia was already squeezed during the Covid-19 crisis, with high rates of ship cancellations as the pandemic began and shortages of containers and slower handling speeds continuing to affect world trade volumes.
The immediate impact of delays in the Suez Canal will centre on European – Asian trade
The immediate impact of delays in the canal will centre on European – Asian trade, adding delays to already disrupted supply chains affecting oil and refined products' supplies. But the route is significant to world trade as a whole, with around 10% of world trade by tonnage and 9% of the world's seaborne oil (equivalent to 5.5 million barrels of oil per day) passing through the Suez Canal over the course of a year.
As delays extend, shipping liners may opt to re-route vessels via the Cape of Good Hope, increasing transit times by a third but avoiding the uncertainty of how long the problem will take to resolve and for backlogs to pass through the canal.
As the Suez Canal Authority works to free the canal, traffic is building up, and missing inputs will disrupt supply chains. But delays measured in days are normal in container shipping (depending on the route), and in the current context of much more acute capacity pressures at some ports, this setback on its own will not do much to trade volumes or cause much further harm to supply chains.
The ongoing effects of shipping liners' route choices, including container shortages and limits on port handling speeds, are likely to be more visible in production and trade data in the months ahead.
Disclosure: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
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Bert Colijn is a Senior Eurozone Economist at ING. He joined the firm in July 2015 and covers the global economy with a specific focus on the Eurozone. Prior to this, he worked at The Conference Board, a global think-tank, in Brussels focusing mostly on long-term economic growth. He holds an undergraduate and graduate degree in International Economics and Business from the University of Groningen.
Carlo is an Economist at ING and has been with the firm since January 2016. He is mainly interested in the future of banking, blockchain and virtual currencies. He began his career at Barings Asset Management and holds an MSc in Economics. 
Inga Fechner is an economist at ING in Germany, covering international economic developments with a specific focus on Austria. She joined the company in 2014 after graduating in Economics from the University of Münster, with studies abroad in Japan and Italy.
Marieke Blom is the Chief Economist at ING in the Netherlands.
Maurice van Sante is a Senior Economist covering the construction and real estate sectors. He joined ING in 1998 and till 2006 he was a treasury advisor and cash manager consultant. Maurice studied Economics at the Erasmus University in Rotterdam.
Peter Vanden Houte is Chief Economist Belgium, Eurozone and has been working with ING in various research functions for the last 20 years. He is also chairman of the “economic commission” at the Belgian Employers Federation.
Robert Carnell is Chief Economist and Head of Research, Asia-Pacific, based in Singapore. For the previous 13 years, he was Chief International Economist in London and has also worked for Commonwealth Bank of Australia, Schroder Investment Management, and the UK Government Economic Service in a career spanning 24 years. Robert has a Masters degree in Economics from McMaster University, Canada, and a first-class honours degree from Salford University.
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