Canal Crisis: Investigating the Suez “Stew”
Posted on : June 28, 2021Author : Ratnadeep Maitra
The mercurial blockage of Suez Canal owing to the wedging of a gigantic container vessel MV Ever Green, running aground on March 23 engendered a significant rupture in the global shipping processes, while rekindling global attention to the plight of supply chains around the world. The provenance of this eco-strategic waterway dates back to Egyptian antiquity, wherein the first of such a kind was dug and subsequently developed under the patronage of Senausert III Pharaoh of Egypt (1874 BC). However, the primal canal was made redundant soon after, with intermittent reopening in the centuries to come. The modern Suez, attributable to the concerted French efforts, was ultimately made functional for navigation on November 17, 1869. It was a watershed moment in the realm of global maritime connectivity, shaping the trajectory of the British colonial empire in a profound way.
The recent closure subtly insinuated towards the frailties of global commerce. While the logistic management chains around the world, has garnered an enviable degree of efficacy, through an interplay of stringent deadlines, cost minimizations, and punctual delivery mechanisms, an unpredictable mishap as the blockage, emanating from a confluence of material negligence, human fallacies and unperceptive reading of localized settings, resulted in a negative spillover in trade with concomitant economic ramifications, in a world, already grappling with a deadly pathogen.
The untoward development has been viewed as an eye-opener for businesses hinged upon supply chains, exposing the vulnerabilities in their modus operandi and the lacuna in their inventory techniques. As the ships made a forced detour around the Cape of Good Hope in South Africa, it inevitably stymied the pace of the arrival of containers at their destination points, while undermining the speed of their emptying and refilling with other goods, heading towards other locations. As a logical outcome, there was a sky-rocketing of logistical costs, the brunt of which was to be eventually borne by the consumer.
In a similar vein, the resource-starved semi-conductor industries were largely at the receiving end of such disruptive shipping delays. The European firms, most of which, tended to procure the essential constituents for developing computer chips from Asian suppliers, were gravely affected by the blockage, bringing electronic production to a scary standstill. Moreover, in the absence of any other feasible channels of mobility for shipping goods between the two geo-economic strongholds, the blockage was bound to impede the movement of cotton from India for garments, petroleum from Middle East for plastics and auto-parts from China, culminating in visible outcomes around the globe.
On the larger question of oil shipments, reports have estimated that about 1 million barrels of crude oil and 1.4 million barrels of gasoline and concomitant refined products, move through the canal to Europe on any given day. Notwithstanding the high figures, the ultimate impact on the oil market can be construed as limited at best, given the plummeting energy demand in the wake of a pandemic. In addition to this, the unrealized potential of the Sumed pipeline can be gainfully tapped at this critical juncture, to transport oil around the canal, from one end near Alexandria, Egypt, to a terminal near the Red Sea. To tackle the imminent delay in the arrival of jet fuel, the onus lies on the refineries back in Europe, to ramp up their productive capacity, and arrest the lull.
The conceptualization of throughput as a yardstick of traffic-measurement in units such as tonnes or ships becomes important to dissect the rationale behind as well as recurrence of such blockages. Traditionally, throughput had a modest value, owing to which the cost of disruption remained minimal, as did the timespan to reverse the slack. But in the recent decades, the steep rise in throughput, has made the resultant repercussions increasingly difficult to sustain, case in point being, how the recent blockage witnessed the cyclical process of loading and unloading of the ship ingredients, jump in leaps and bounds.
While commentators have regarded the Suez Canal Crisis, to be a one-off anomaly, an aberration at most, there must be a parallel system invested in risk gauging and mitigation frameworks to preempt such mishaps in the near or distant future. Some broad precautionary insights may be outlined in this regard.
A renewed emphasis must be given on forecasting, where every potential risk must be tabulated, with proper quantitative and qualitative analysis of the timespan of disruption, human losses and commercial pitfalls. It should not only incorporate the dimensions of the canal in question, but also the salience of the ships passing through it. This must be coupled with a probability analysis of the risks to earmark any abnormality.
The regulatory measures must be installed, only after substantial inferences are drawn out from the key findings of the problem-area. In the canal crisis, a fool-proof evaluation of the engine power vis-à-vis the weather systems prediction could have been thought of, before an ingress of any ship in that waterway. Similarly, a mechanism, to control congestion during high winds, to preclude catastrophic ship collisions, can also be conceptualized and put in place. Finally, alternative routes in the wake of extenuating circumstances, devoid of high opportunity costs, can be properly institutionalized, to minimize the disruption flowing from such exigencies.
The Suez Canal Crisis is a grim reminder to the world that the vibrancy of the global economy is strongly contingent on the smooth passage of sea freight, ignoring which, the premiers and the populace would invite their own downturn, from a protracted geo-economic conundrum.
References
- “Lessons from the Suez Canal blockage”
- “Without Shipping, the Global Economy Sinks”
(https://foreignpolicy.com/2021/03/31/suez-canal-ever-given-shipping-global-economy-sinks/)
- “Suez crisis and the fragility of global trade”
- “Explained: How will the Suez Canal blockage affect supply chains?”
- “Suez Canal Blockage Adds to Pressure Points in Global Trade”
Ratnadeep Maitra
Intern, Asia in Global Affairs
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