The blockage of the Suez Canal has caused a ripple effect on global maritime trade, we conclude this series with part three on the impacts caused by the grounding of the Ever Given.
Economists predict inflationary pressures
The blockade adds to supply chain disruptions that have already cost global trade more than $200 billion since the start of the year, according to estimates by Allianz SE. Every week that the Suez Canal remains closed adds as much as $10 billion to the bill.
Economists predict higher prices as a result
“I’m relatively optimistic about the additional impact to trade,” said Joanna Konings, senior economist at ING. But “with everyone’s tolerance for absorbing higher shipping costs, we may see some pass through this episode. It’s an inflationary shock that could go straight to the consumer.”
Marlin Santorini tanker diverts, may be the first to do so
The tanker Marlin Santorini, a 1 million-barrel Suezmax, changed its destination from the Suez Canal, according to tanker-tracking data compiled by Bloomberg.
The ship was sailing east in the Atlantic Ocean toward the Mediterranean Sea, pointing to Port Said at the northern end of the canal. It then turned south and appears to be headed for Africa.
Two ship brokers said they had not seen any other tanker detours to avoid the Suez since the blockade, although many other types of vessels, including LNG carriers and container ships, have done so.
Food supply chain faces risks
The Suez blockade could mean limited food availability, supply delays and higher prices at a time when economies and households are already grappling with rising food inflation and Covid-19 disruptions.
Wealthy but food-deficit Gulf states and food aid-dependent nations in the Horn of Africa are particularly vulnerable to disruptions in grain flows. The canal handles at least 15% of the world’s rice and wheat exports.
“If it’s a delay of a month or more, it will put significant pressure on prices and reduce availability in some places,” Tim Benton, director of emerging risk research at Chatham House in London and a food security expert, said in an interview. “There are many compounding problems. The global food system is already under pressure from Covid. And clearly, anything that adds a little bit more to the camel’s back makes things ugly.”
Japan’s oil supply won’t be affected
The Suez Canal blockade will not immediately affect Japan’s crude oil supplies, Finance Minister Taro Aso told reporters in Tokyo.
“Unlike in the past, Japan currently has enough oil reserves for about 200 days, so I don’t think this problem will immediately affect Japan’s oil supplies,” Aso said.
Russian wheat is not affected to any great extent
The blockade is not causing major problems for Russian grain exports because wheat sales from the world’s top exporter are currently low, said Eduard Zernin, president of the Union of Russian Grain Exporters. There are still no signs of significant Russian sales being caught in the tail, he said.
Elsewhere in the Black Sea region, Ukraine’s deputy economy minister and the head of the country’s grain group, which includes major exporters, said they see no threat to the country’s exports if the situation is resolved soon.
Natural gas prices rise in Europe
The prospect of the container ship blocking the Suez Canal for up to a week boosted natural gas prices in Europe, as fuel-laden cargoes bound for the region face severe delays. The blockade may create a supply gap that could be filled by pipeline from Russia or US LNG. Dutch and British benchmark gas for next month rose on Friday.
Three tankers near the canal entrance will have difficulty delivering LNG from Qatar for scheduled arrivals in early April. Vessels already waiting are unlikely to turn around at this stage, said Fauziah Marzuki, an analyst at BloombergNEF.