“The ships, boxes, and goods are all in the wrong place!” In recent days, practitioners in every link of the global supply chain have made similar lamentations.
It is reported that the heavy cargo ship that “blocked” the Suez Canal is named “Changci”. The length of the ship is about 400 meters, the width is about 59 meters, and the transport capacity is 224,000. tons, it is one of the most advanced and largest container ships in the world. The cargo ship entered the new channel of the Suez Canal on March 23 and ran aground due to strong winds and other weather conditions. There are currently more than 300 ships waiting for passage. As one of the world’s most important shipping lanes, the blockage of the Suez Canal has added new worries to the already tight global container ship capacity.
Xinhua News Agency (Photo courtesy of Suez Canal Authority)
The Suez Canal is blocked, causing difficulties for European and American retailers
Some European and American retailers are worried that the blockage of the canal will affect the global supply chain and may make it “even more difficult” for companies to ensure stable inventory during the new crown epidemic. .
The rescue team created the account “Suez Canal Diggers” on social media. The account introduction said: “Try our best, but there is no guarantee.” This reflects that the current excavation and dredging work is still full of uncertainty, and even hopes that the tide will rise to a certain height to lift the stranded freighter.
Data show that in global maritime logistics, about 15% of cargo ships pass through the Suez Canal. Lars Jensen, CEO of the Danish “Shipping Intelligence” consulting company, said that about 30 heavy cargo ships pass through the Suez Canal every day, and a one-day blockage means delayed delivery of 55,000 containers. German insurance giant Allianz Group estimates that the blockage of the Suez Canal could cost global trade US$6 billion to US$10 billion per week.
IKEA spokesperson Hannah Moder said: “The adverse impact of this incident on our supply chain depends on the progress and time taken of the rescue operation.”
On the afternoon of March 28, the head of the Suez Canal Authority said: “There is no timetable for ships to escape shallow water. There are currently 369 ships waiting to pass through the Suez Canal. Judging from the progress of the incident, it is far from safe.” It is more complicated than previously imagined.”
Early this morning, the head of the Suez Canal Authority said that the rescue team will try to get the ship out of danger today and tomorrow. If it cannot get out of danger on Tuesday, it will Cargo will be unloaded from the vessel.
JPMorgan strategist Marko Kolanovic wrote in a report on Thursday: “While we believe and hope that the situation will be resolved soon, there are still some risks. In In extreme cases, the canal will be blocked for a long time, which may lead to severe disruptions to global trade, soaring shipping rates, further increases in energy commodities, and rising global inflation.”
What impact will it have on crude oil, non-ferrous metals and other commodities?
The “massive ship jam” in the Suez Canal, the “Eurasian artery”, has made many market participants worry that international crude oil and other commodity prices will skyrocket as a result. International oil prices have risen significantly in recent days. The May contract of WTI crude oil futures and the May contract of Brent crude oil futures have exceeded 60 US dollars per barrel.
Cheng Xiaoyong, director of the Baocheng Futures Financial Research Institute, told reporters that the “blockage” of the Suez Canal may have a greater impact on global maritime trade, but for bulk commodities or For dry bulk cargo, the actual impact will not be too great. Since most of the routes passing through the Suez Canal are container ships rather than bulk carriers transporting commodities such as coal, iron, and grain, industrial supplies and consumer goods are greatly affected.
“For crude oil and refined oil, due to strong demand in Asia, the westward transportation of crude oil and refined oil accounts for less than the eastward transportation, coupled with the replacement or supplement of the Mong Kok route , which means that the impact on crude oil trade is short-term. According to Clarkson Research, about 80% of the year, very large tankers sail in the area east of Suez, mainly exporting from the Middle East to Asia. And southward through the Suez Canal The trade is mainly the export of Nordic crude oil to Asia, but the proportion is relatively small, mainly the export of Middle East crude oil to Europe and North America, but mainly Suez tankers and Aframax tankers.” Cheng Xiaoyong said.
In addition, Cheng Xiaoyong believes that if the Suez Canal is “blocked”, oil transportation can still be transported through pipelines and diverted to the Mong Kok route, but it will increase a certain cost. In April 2020, due to the impact of the COVID-19 epidemic and low oil prices, many container ships and oil tankers chose to bypass the Cape of Good Hope instead of the Suez Canal. Some shipping agents believe that detouring around the Cape of Good Hope will not necessarily increase transportation costs, because the additional fuel charges are almost equivalent to the tolls charged by the Suez Canal, but detouring around the Cape of Good Hope will increase the navigation time by about a week.
Zhong Meiyan, director of energy and chemical industry of Everbright Futures, believes that this east-west canal will also face blockage, and the longer it lasts, the greater the impact on the market. Zhong Meiyan believes that the impact of the blockage of the Suez Canal on the market is mainly reflected in the following three aspects:
First, container freight rates will increase significantly. The Suez Canal carries 10% of the world’s maritime trade volume.�25% of container transportation needs to pass through the Suez Canal, and the ship jam in the Suez Canal has had a greater impact on the global trade market. The shortage of containers in Asia may further worsen, leading to rapid growth in container shipping prices and rising logistics costs. It is worth mentioning that tanker freight rates have also increased recently.
The second is that if the congestion in the Suez Canal takes weeks to resolve, container shipping companies including Maersk and Hapag-Lloyd will choose to change the channel and sail around the Cape of Good Hope. Shipping from the Persian Gulf to Europe will add 15 days to the voyage, and reaching the United States will add 8-10 days to the voyage. This will cause a mismatch between the supply and demand rhythms of crude oil in the Middle East (the place of departure) and the West (the United States and Europe), resulting in a situation where the east is weak and the west is strong, which may further affect the direction of crude oil prices.
Third, cross-regional trade in refined oil products will be severely hampered. In particular, with the serious glut of refined oil products in Asia and the gradual closure of European refineries, aviation kerosene and diesel from the Persian Gulf and the west coast of India will choose opportunities to flow from Asia to Europe and North America, and this trade path often relies on the Suez Canal to achieve cross-regional arbitrage. . The shipping capacity is tightened instantly, and the volatility of the relatively closed Mediterranean tanker freight market is expected to be the most affected, and will be transmitted to the Persian Gulf market and the Far East market in turn, putting pressure on refined oil exports in the Asian market. Looking at naphtha, the East-West naphtha spread (the difference between the price of naphtha cargoes delivered to Japan and northwest Europe) has increased in April.
Zhong Meiyan believes that under this background, the market’s expectations for “inflation” have returned. It is worth noting that crude oil and other commodity assets jumped sharply last Friday. We believe that the “Container Ship Grounding in the Suez Canal” incident may become the “butterfly” that inflames the wings of inflation. The market will continue to pay attention to the game between great powers and inflation-driven issues. Another upward driver of oil prices.
However, some analysts believe that rising market concerns about the supply chain have led to rising oil prices, but the tightening of prevention and control measures by many European countries in response to a new round of epidemics will still curb crude oil prices Demand, coupled with the fact that transportation channels in oil-producing countries such as the United States have not been affected, the upside space for international oil prices is limited. For bulk commodities such as non-ferrous metals and agricultural products, the Suez Canal is not an important transportation channel, and its impact may be limited.
This may aggravate problems such as the difficulty of finding a box and the rising shipping prices
In the second half of last year Since then, my country’s trade in goods has picked up, which has led to a substantial increase in international shipping demand. Many ports have experienced problems such as a shortage of containers and rising shipping prices. Market participants believe that if the blockage of the Suez Canal continues and a large number of cargo ships cannot be turned over, it will inevitably lead to an increase in shipping rates, increase global trade costs, and cause a chain reaction.
Data recently released by the General Administration of Customs show that after my country’s exports hit a record high last year, they once again increased significantly by more than 50% in the first two months of this year. As the most important mode of transportation in international logistics, more than 90% of the import and export transportation of goods relies on sea transportation. Therefore, exports have achieved a “good start”, which means a large demand for shipping capacity.
In Cheng Xiaoyong’s view, the current boost to commodity prices caused by the Suez Canal is mainly due to market expectations for rising transportation costs and inflation expectations. The blockage of the Suez Canal will further exacerbate the tight supply pressure of containers. Due to the surge in global demand for cargo ships carrying containers, even bulk carriers are beginning to be in short supply. At a time when the recovery of the global supply chain is facing bottlenecks, this can be described as “adding fuel to the fire.” In addition to containers carrying a large amount of consumer goods that are “stuck” in the Suez Canal, there are also many empty containers that are also blocked there. As the global supply chain urgently needs to be restored, a large number of containers are stranded in European and American ports, which may aggravate the shortage of containers and bring great challenges to shipping capacity.
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