The “Suez Canal Effect”– From bad to worse?

What else could possibly go wrong with today’s global supply chains?  An already taxed system, fraught with delays, maxed out capacity, severe ports congestion, and a broken conveyor belt of empty containers, will now face even more delays and challenges due to the Ever Given’s extended blockage of the Suez Canal.

Significant impacts that we are immediately seeing:

  1. US West Coast vessel space from Asia is over booked several weeks out as customers try to divert some cargo to the west coast instead of the east coast all water “Just to get it to the USA as quickly as possible.”  We are already being told by our partners in Asia that, unless you are already locked-in with allocations based on previous forecasts and history, the month of April is already fully booked, and that next available booking space is mid-May.
  2. Equipment supply is extremely challenged right now. Vessels with empties, that were returning to India, Southeast Asia, and China, also got stuck in the Suez– so the return of these desperately needed empty containers will be delayed 2 to 3 weeks.
  3. All Water space for vessels departing on Panama services is fully booked through mid-May.
  4. All Water Service via the Suez will be impacted as ships, already diverted around the Cape of Good Hope to avoid the Suez Canal, will now have to add one month to their voyage to get to the east coast and back to Asia. This effectively removes that capacity from the market.
  5. Ocean Freight Premiums are back: Carriers are understanding the impact that this removal of capacity will have. With vessels fully booked through April and in some cases into May, they are reserving space for “Premium” paying customers and bumping customers who are unable to or unwilling to pay for their “Premium” services.
  6. The supply of equipment in India just got worse - and we thought it couldn’t get worse!  100% of the traffic from the Indian Subcontinent to the US East Coast travels through the Suez, so the disruption caused by the Ever Given is being felt more severely in India, Pakistan, Sri Lanka, and Bangladesh.
  7. Vietnam continues to be the epicenter of the nightmare – factors contributing to this include:
  • A limited amount of carrier capacity to begin with, especially ex-Haiphong, Danang and especially Ho Chi Minh.
  • A heavy reliance on Suez services for space to the US East Coast as well as for the supply of empty equipment.
  • The impact of China tariffs and relocation of certain manufacturing to Vietnam since 2018.
  • An unending surge of furniture imports as Americans redecorate and spend on their homes.
  1. How long will the difficulties last? - Our predication is this will continue through and past Lunar New Year 2022.  Fasten your seatbelts…

What to do? -  As always, now is not the time to panic. Engaging even more closely with your supply chain partners is always a good place to start. For more suggestions please find our SIX STEPS TO SUCCESSFULLY NAVIGATE THIS YEAR’S CONTRACT SEASON where you will find helpful recommendations and links to other resources.