This strange-looking accident constitutes a major macroeconomic shock for Europe. Germany reminded us yesterday that 9% of its export go through the Suez canal, and a much bigger proportion of its chemical trade. As we saw at the beginning of the pandemic, industrial supply chains are sensitive, even to small disturbances in transportation infrastructure. And this is a big disturbance.
Hundreds of ships are stuck. Some are now re-routed to the pre-Suez route around South Africa. That’s an extra 10 days of travel. What makes the situation worse is that air transport cannot take up the slack, while demand for Asia-made products is high. FAZ has done the math on container shipping costs – which have gone up from a previous $1500 to $9000. Oil prices has already risen by 6% since the ship stranded. The share prices of shipping companies has fallen.
Even by the standards of modern container ships, the Ever Given is huge. 400m long, it is one of the world’s largest. Dutch rescue teams will eventually get it unstuck, but it will take a while until the Suez Canal can be used again, and the backlog of ships clears. The accident will have damaged the canal’s infrastructure, which also needs to be repaired before normal operations can resume.
This will be a V-shaped shock no doubt, but coming at a time like this, it is the last thing the trade-dependent European economy needs. Sacks of rice no longer fall over in modern China. But containers that travel from Malaysia do – kind of.
The above view from Eurointelligence.