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Suez Highlights the Fragility of Globalization

Suez Highlights the Fragility of Globalization

Photo: Suez Canal Authority.

The global supply chain is an elaborately choreographed ballet, nowhere more than in the flow of containers through which 60% of the world’s seaborne trade travels. Calibrating a stream of over 800 million boxes each year entails sophisticated tracking that makes sure containers reach their destination. The system reaches down to the crane operator who stacks each box in a specified position on the ship, and ensures enough empty boxes are on site to load the next shipment.

Last week the ballet turned into a mosh pit, when a character named MV Ever Given stepped out of its choreographed role to disrupt the entire dance. It blocked the world’s most critical trade chokepoint, the Suez Canal, an artery carrying 30% of the world’s container traffic. Effects radiated across the planet. Oil prices ticked upwards. Ships were held up at major ports from Rotterdam to Newark. Store and e-commerce deliveries were delayed. Both Amazon and Ikea had shipments on the Ever Given itself.

In our just-in-time world, where ships act as precisely scheduled floating warehouses, a week’s interruption creates a backlog that lasts a lot longer. It may only take days to relieve the maritime traffic jam and restore normal canal operations. But leading container shippers predict it could take weeks or even months to sort it all out, as off-schedule ships pile into congested ports. The shipping industry was already struggling with impacts of the pandemic on operations and the way it has shifted consumer purchases from restaurants and entertainment to consumer goods. Containers were short in Asia where much shipping emerges, and costs were way up.  Then the canal blockage piled on. It is “going to result in one of the biggest disruptions to global trade in recent years,” reported MSC, the world’s second leading container shipper.

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