By Christiana Ioannou
According to an estimate, almost 90% of the world trade is transported by sea. The Suez Canal is one of the world’s busiest shipping routes for shipment of oil & refined fuels, grain, and other trade linking Europe and Asia. According to the data in Lloyds list, roughly 12 percent of global trade passes through Suez Canal, carrying over $1tn worth of goods a year and about 50 ships a day.
Recently, a cargo ship MV Ever Given – 400-meter long, horizontally wedged in the Suez Canal by blocking off all the traffic on 23rd March. It took enormous efforts to re-float the massive cargo ship & it finally freed on Monday, 29th March after a week. Several economies located in the eastern and western parts of the world suffered a devastating economic loss due to the canal blockage.
MV Ever Given & its effect on global trade
MV Ever Given is one of the largest container vessels in the world operated by Taiwanese transport company Evergreen Marine. The ship is 1,312ft weighs 200,000 tonnes, with a maximum capacity of 20,000 containers.
The blockage of the Suez Canal by Ever Given resulted in massive economic loss worldwide. Hundreds of cargo ships worth billions were either stuck in the traffic or forced to take longer routes, causing significant delays in essential shipments. The Suez Canal at the time was holding up traded items worth around $6.7 million per minute. It is equivalent to $400 million per hour and $9 billion per day.
The six days blockage has already caused a loss of roughly $54 billion to global trade. The canal has been freed, but still it will take some time to get things back on track & its impact with be felt for months to come. This blockage will cause the following disruptions to global trading:
Rise in the oil prices: The Suez Canal is an essential route for tankers transporting oil and fuel gas. It means a giant ship blocking the canal will delay all the shipments carrying oil and fuel gas will be late. It could lead to a sharp rise in the prices of oil and gas.
Shortage of essential commodities: The ships carrying essential commodities, food grains, and other items will take some time to reach the ports through longer routes. It will create a temporary shortage of commodities and supply chains vulnerable in the respective countries.
Shortage of shipping containers in Asia: There will be a shortage of shipping containers in Asia as the retailers will get furniture, TVs, clothes, auto parts, and several other goods shipped via containers.
Slow global trade growth: The blockage of the Suez Canal has limited long-term impacts, but economic analysis estimated that the blockage could slow down global trade growth by 0.2 to 0.4 percent.
Impact on manufacturing businesses: The manufacturing companies in Europe often get the manufacturing components such as semiconductors, which will be vulnerable to disruptions from shipping delays in the coming week.
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