Expert comment: Ever Given grounding impact on prices

Categories: Salford Business School

Jonathan Owens, logistics expert from the University of Salford Business School, comments as the Ever Given container ship remains grounded in the Suez canal, blocking one of the main global supply routes.

He said: “This situation has piled on more problems for beleaguered shipping companies, who were already facing disruption and delays in supplying products to customers due the unbalanced supply chains, in the wake of the global pandemic.   

“This could not have come at a worse time for one of the world’s busiest manmade waterways, providing essential supply route for oil, natural gas, and general shipping container cargo between the Atlantic and Pacific. Around 12% of goods globally, about £2.2 billion in trade, passes through the canal every day.

“The unbalanced supply chain and need for shipping containers to be restored would mean that if the blockage is not going to be cleared in the very near future shipping companies are going to have to re-route their cargo much further south, causing delays of up to approximately 7-10 days, which in turn puts extra strain on a stretched supply chain. 

“Currently it is said there are around 10 million barrels of oil and petrol queuing to enter the canal. Already there has been small rises for prices of oil on the market, so the longer this goes on we could see short term rises at the fuel pumps and this could knock on into product rise for on-line to compensate for the rising cost of on-line deliveries if the retailers are not willing to take the hit.  The delays could be even longer and costly if the decision is made to break up the ship if no progress is made to unblock the canal.

“If the canal becomes unblocked, many ships that are going towards Europe will move the bottleneck there, because there will be a mass movement of ships all trying to get out of the canal and go in the same direction.  Therefore, for a period we will see a state of high congestion at our ports.  Which are particularly slower due to the extra Covid procedures in places with the shipping containers.  There will be no clear-cut product that will be impact rather a series of products, from toys and furniture to electrical items, and the canal is a choker and a main shipping supply route.  Whatever the result will cause repercussion for a while in our supply chains.” 

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