The blockage of the Suez Canal in Egypt by a giant cargo ship could have wide-ranging supply chain implications worldwide, two Texas A&M experts said in separate interviews.
The Suez Canal, which belongs to Egypt, is a waterway linking the Red and Mediterranean seas.
According to the Associated Press, the Ever Given was built in 2018 and is 193 feet wide and nearly a quarter-mile long — approximately the length of four football fields. On Tuesday morning, the ship reportedly encountered a sandstorm that decreased visibility, and the ship became stuck. Experts have told national and international media outlets that removing the ship could take weeks.
Madhav Pappu, clinical assistant professor at Texas A&M’s Mays Business School, worked for nine years as a merchant marine and has taken several trips through the Suez Canal. Pappu said the Ever Given can carry approximately 20,000 containers at one time and weighs about 200,000 tons. As of Friday afternoon, well over 200 ships were waiting for the Suez Canal to be cleared. Multiple attempts to dislodge the Ever Given have so far proved unsuccessful, and photos of those efforts have spread widely and in some cases been turned into social media memes.
Approximately 10% of world trade flows through the canal, the Associated Press reported Friday, and added that the Suez Canal is particularly vital regarding oil transports.
“These kinds of supply chain disruptions can cause havoc,” Pappu said.
Raymond Robertson, director of the Mosbacher Institute for Trade, Economics and Public Policy at the Bush School of Government and Public Service, said Friday that particularly in the past five years, shipping vessels have grown, meaning a larger risk of capsizing, running aground, onboard fires and other potential issues.
“Something we’ve seen with global supply chains is that these container ships are becoming bigger and bigger, and that really increases the risk per shipment — and this is another example of those risks,” Robertson said.
He said large supply vessels contain parts and materials for a wide variety of items that are often partially constructed in different places. He likened the Suez Canal blockage to the far-reaching effects of a car accident that backs up traffic, and Robertson explained that the “deeply integrated production chain that we have” means such an event can have worldwide effects.
Pappu described the United States as a “high labor-cost” country and said “we have outsourced our needs for products to other countries.” He explained that the Suez Canal stoppage impacts the precisely timed global product market and that an extended stoppage could cause companies to have to go through emergency supplies and/or find alternate means of shipping movements.
“This was bound to happen sometime,” Pappu said. “This is going to be a pretty big blow to those who have cut those corners so fine — this is going to change how we think about supply chains and transportation in the future.”
Robertson said “these types of stoppages, they ripple out in much more profound ways than they would have 30 or 40 years ago.” He also encouraged observers not to panic about what the stoppage could mean.
“You don’t want to get the idea that this is a risk that means we should start reshoring,” Robertson said, explaining that reshoring is the idea of returning more production to the U.S. for myriad reasons, including increased risk. He said costs to consumers would rise in that case.
“You really need to take into account the benefits that the larger container ships have brought us in terms of reduced shipping costs and cheaper products that we have from global integration,” Robertson said. “The main message is not to freak out about this. This is an example of heightened risk from increasingly delicate production relationships, but it doesn’t mean that the risk justifies restructuring the global supply chains to mitigate the risk.”