Consumers Could Soon Feel Price Crunch Caused By Clogged Suez Canal
Just as the business world dared to breathe again amidst global pandemic shutdowns, a quarter-mile-long container vessel clogged up a major shipping artery.
The Panamanian-flagged Ever Given, one of the world’s largest cargo ships, ran aground in the Suez Canal and effectively blocked over 350 vessels from completing their trips. At a time when shipping costs had already spiked dramatically, this latest event added insult to injury.
Beyond the blocked vessels, 367 more wait to even enter the Canal. This means that the aftereffects will ripple out far past the moment when the Ever Given is finally dislodged.
If the dredging operation to free the vessel edges into weeks to complete, some of those 367 ships — and the ones coming after them — may have to be sent around the southern tip of Africa. That would add thousands of miles and about a week to the journey, further ballooning already-swollen shipping expenses.
(via CNN): More than 80% of global trade by volume is moved by sea, and the disruptions are adding billions of dollars to supply chain costs. Globally, the average cost to ship a 40-foot container shot up from $1,040 last June to $4,570 on March 1, according to S&P Global Platts.
Those costs add up. In February, container shipping costs for seaborne US goods imports totaled $5.2 billion, compared to $2 billion during the same month in 2020, according to S&P Global Panjiva.
Ultimately, rising costs will be passed onto consumers at a time when most simply can’t. afford them. And the pain could extend across the board, not just just for direct consumer orders. Businesses who rely on components and ingredients being shipped to them will also translate those costs into the customer’s bottom-line price.
Companies from Under Armour (UA) and Hasbro (HAS) to Dollar Tree (DLTR), Urban Outfitters (URBN) and Crocs (CROX) have all warned about the supply chain crunch recently, pointing to container shortages, port congestion, rising shipping costs and logistics challenges. Costco (COST) said earlier this month that it was having trouble stocking imported cheeses because of a shortage of shipping containers and bottlenecks.
So, it’s likely just a matter of time before consumers feel the cost crunch.