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Shock-tired global economy braces for Suez mess supply shake
(Bloomberg) – Supply Lines is a daily newsletter that tracks commerce and supply chains disrupted by the pandemic. Six thousand kilometers from the Suez Canal in the American Midwest, the CEO of a multinational manufacturer of industrial adhesives has one eye on the clogged commercial artery and another on ways to minimize the fallout on his business. $ 8 billion. This only adds to the continued stress in the supply chain “for chemicals, Jim Owens, president and CEO of HB Fuller Co. of St. Paul, Minnesota, told analysts at Wall. Street as rescue teams failed to clear Egypt’s waterway late last week. “Is this going to transform everything in a negative way?” No, but it is an issue that we are watching very closely. The same goes for the rest of the trading world. Efforts to free the stranded from Ever Given are approaching a pivotal stage, drawing on machines and human engineering, but also hoping for celestial pull. High tide through Monday offers perhaps the best chance yet to float a steel monster four times as heavy as the iconic Sydney Harbor Bridge. For the global economy, the daily balance is roughly $ 10 billion. dollars of raw materials, industrial inputs and consumer products on ships. crisscrossing the canal, with supply chain fears mostly directed at Asian exporters and European importers. The broader economic costs – so far low compared to the $ 18 trillion in global merchandise trade per year – escalate each day the canal remains closed. “It is a blow to the already limited supply chains that had just recovered from the Covid. pandemic, ”Rahul Kapoor, vice president of shipping and commerce at IHS Global Insight in Singapore, told Bloomberg Television on Friday. “If it takes weeks, it could turn into what we might call catastrophic.” Vincent Stamer, an international trade expert at the German Kiel Institute for the World Economy, said the delays so far will cause economic damage, “but it is too early to quantify them. It’s not too early for companies to come up with other plans. A few container ships and tankers are already avoiding the blocked shortcut between the Red Sea and the Mediterranean and instead make a detour via the Cape of Good Hope at the southern tip of Africa. That adds more than a week to the Asia-Europe trip and hundreds of thousands of dollars in fuel costs, but it’s hedge against a potentially even longer delay in transit through the Suez. Companies from Swedish furniture giant Ikea to Illinois-based Caterpillar Inc., a global manufacturer of construction hardware, are among ocean freight customers weighing on alternative sourcing plans. higher transport costs, tighter supplies and longer delivery delays for producers and suppliers of goods.Even before the incident that shut down the Suez, input costs in the eurozone rose at the pace the fastest in a decade, as measures of prices paid and charged by U.S. companies rose to new highs in March, as material shortages and supply chain disruption raised concerns about inflation. dangers of too much globalization and supply chains exposed to too many unpredictable risks, but overestimating those dangers could be a mistake, said Robert Koopman, chief economist for the World Trade Organization in Geneva. He sees the Suez situation as another test that the global economy will face in the coming weeks, but will eventually pass. The giant ship, fully loaded, is “a great photo op,” he said. “But I wouldn’t be too excited about the daily impact on commerce.” Koopman said blocking channels doesn’t mean global supply chains risk falling apart – it’s all part of doing business in today’s interconnected global economy. Whether it’s a winter cold snap in Texas grumbling petrochemical production, a container shortage on trans-Pacific trade routes, or a fire at a chip manufacturing plant in Japan, the disruptions happen all the time and businesses are adapting. are real risks out there, ”Koopman said in an interview Friday. “They must be heard and taken into account. I wouldn’t take this as instructive about the risk of over-globalization. International merchandise trade has been a rare bright spot over the past year, and has recently returned to pre-pandemic levels. That’s the danger with the latest supply shock – it could further strain the already strained networks of ships, ports, trains, trucks and warehouses. According to a report by Allianz Research, every week without traffic on the Suez Canal could hamper the growth of world trade. from 0.2 to 0.4 percentage point. Even before the Suez incident, supply chain disruptions since the start of the year could reduce trade growth by 1.4 percentage points – around $ 230 billion in direct impact, Allianz said . “The problem is that the blockade of the Suez Canal is the straw that breaks global trade is back,” Allianz said in the note. Caught in the turmoil are around 6,200 container ships that carry over 80% of the trade Dominated by a dozen companies based in Europe and Asia, they are already operating at full capacity and charging record rates for 20- and 40-foot-long boxes that they are struggling to match with global demand. Africa for an extended period would reduce around 6% of the global container market capacity – roughly the equivalent of decommissioning 74 ultra-large ships like the one that buried itself in the shores of Suez. , according to a Friday night memo from “Such an amount of capacity absorption will have a global impact and lead to severe capacity shortages,” said Alan Murphy, CEO of Sea-Intelligence. “It will impact all trade routes. . ” It’s hard to say how hard it is to say, as the Port of Rotterdam can attest.According to the latest count on Friday, 59 ships caught in Suez’s growl were bound for Europe’s largest seaport. Ships can take a week or two to get there, or even longer, and they can arrive in manageable waves or in packages that exceed the port’s capacity. Ship captains could radio an arrival well in advance, or may -Be not. Ready in Rotterdam All this new uncertainty means that “we have a challenge to face,” said Rotterdam spokesman Leon Willems. “The number of containers they carry will be put on trains, barges and trucks and stored in depots – but these depots are quite full at the moment. ” At HB Fuller of Minnesota, which makes about half of its income outside the United States, the February winter storms in Texas caused some facilities to be temporarily closed, although Owens said at a conference. phone Thursday that the company is expected to make up for the loss of the business “and more.” Now, looking at the problems in the Suez, it has a team that is monitoring “exactly what materials our suppliers have that might be on these ships.” , he said. “They are well into the mode of dealing with these problems and a ship is stranded. in the Suez, that’s exactly what they’re set up to do, ”Owens said. “They will do very well.” For more articles like this, please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP
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