Global supply chains will feel the effects of the Suez Canal backups for weeks, and the situation is likely to exacerbate choke points at West Coast ports in the United States as the economic recovery from the pandemic continues.
Trans-Pacific cargo routes to the U.S. will be hit by longer wait times at already crowded terminals at the Ports of Los Angeles and Long Beach, and many shippers will seek alternate routes for their goods, according to Glenn Koepke, an analyst with supply chain visibility platform FourKites. Kopeke cited week-long wait times in L.A. and Long Beach even before the Evergreen Line Corp.’s “Ever Given” ship ran aground on March 23, halting traffic through the waterway for a week. Impending delays will only worsen the problem, he said.
“The U.S. market was already a challenge, and this can’t help,” said Koepke, senior vice president of customer success for FourKites, adding that shippers moving products from Asia to the U.S. are likely to seek routes to other ports along the West Coast or via the Panama Canal to avoid the choke points.
Other ripple effects may include missed first-quarter sales targets for companies that couldn’t get their goods to market on time and a supply imbalance that may linger until conditions begin to stabilize, likely in three to six months, Koepke also said.
U.S grocery stores, department stores, auto and home supplies stores, and surgical and medical equipment suppliers will be among the hardest hit industries, according to information from data and analytics firm Dun & Bradstreet and supply chain technology firm E2Open, which released a report this week on the ripple effects of the incident. The companies said the top materials found on shipments through the Suez Canal to the U.S. include kitchen and bathroom linens, electrical and photosensitive materials, construction materials, toys, furniture, and pharmaceuticals.
Europe will feel the strongest impact from the blockage, as the Suez is the main artery for Asia-Europe ocean cargo.
“While considerable attention has focused on the economic value of cargo trapped on vessels and their inability to move through the Suez Canal, the financial impacts on downstream production that depend on the timely delivery of these materials is magnitudes greater,” according to Pawan Joshi, executive vice president of product management and strategy for E2Open. “For instance, the delay of an inexpensive but crucial automotive part en route from China can prevent the sale of the entire vehicle in Germany.”
Koepke agreed and added that there will be capacity crunches and backlogs at ports across Europe that will lead to spikes in storage fees and other costs. He said he expects steep increases in spot rates for containers coming out of Asia to Europe, for instance, and said that air freight pricing is also expected to increase as shippers shift some of their shipments from ocean to already tight airline capacity.
“We’ll see companies that have critical freight have to expedite that to air,” Kopeke said. “We’ll continue to see lumpiness, increased pricing, and impact on air freight.”
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