Companies Consider Alternative Routes, Assess Costs As Suez Canal Blockage Continues


European and international businesses are bracing for possible increased costs and growing supply chain complications as the Suez Canal lockdown heads for a fourth day amid signs of even longer backlogs.

Retail and manufacturing importers are watching for delays in their supply chains that are already strained by global disruptions, and some are considering alternative routes, including sending goods by more expensive air freight or over ships sailing around Africa, which could lengthen deliveries by up to two weeks.

“We are keeping an eye on the situation,” said a spokesperson for Dutch brewing giant Heineken NV, adding that some of the company’s containers were delayed. “We feel comfortable at the moment with the contingencies we have in place,” the spokesperson said.

Confuse

Shipping companies whose ships are idling in or near the Suez Canal are considering a detour through Africa. The Cape of Good Hope route is considerably longer and consumes more fuel, making it less popular than the Suez Canal option.

Major global maritime routes

Example: Singapore-Rotterdam, Netherlands

Major global maritime routes

Example: Singapore-Rotterdam, Netherlands

Major global maritime routes

Example: Singapore-Rotterdam, Netherlands

Major global maritime routes

Example: Singapore-Rotterdam, Netherlands

The companies are tracking the growing backlog of the Suez Canal as authorities scramble to refloat the Ever Given, a 1,300-foot vessel operated by the Taiwanese group Evergreen that got stuck in the canal.

Safeguarding the Suez Canal will generally not directly affect large US retailers, but European businesses will be affected by an already tight shipping market, said Chris Sultemeier, former executive vice president of logistics for Walmart Inc., the largest importer and retailer in the United States

“The Suez is mainly used for Asia-Europe traffic, so from a consumer goods point of view, from a retailer point of view, it will have a dramatic effect on Europe,” he said.

Footage shows authorities working to dislodge a giant container ship that got stuck in the Suez Canal, blocking one of the world’s busiest trade routes for oil and manufactured goods. Photo: Suez Canal Authority / EPA / Shutterstock

Premium motorcycle maker Ducati Motor Holding SpA, which manufactures its bikes in Bologna, Italy and exports worldwide, said finished products destined for Asia via the channel are unlikely to reach customers on time.

So far there has been no impact on Ducati’s production. But chief executive Claudio Domenicali said supply disruptions due to transport difficulties over the past few months are among the biggest threats to the company’s takeover since the second half of 2020. “It is a bit of a bit. worse than last year, ”Domenicali said.

A Ducati spokeswoman said the company, owned by German automaker Audi AG, would arrange alternative transport, including more expensive air freight, if delays at the Suez Canal threaten the import of parts needed for the production.

Executives at some companies are weighing the costs of waiting for the canal to reopen – which could take days or more, shipping experts say – against the costs and timing of other transportation options.

Freight rates for shipping containers from Asia to Europe, which have skyrocketed over the past year as retailers and manufacturers rushed to restock stocks depleted during the pandemic, have remained stable during the Suez blockade, but that could change if it drags on.

“If the delays persist, that’s another story,” said Eytan Buchman, director of marketing at Freightos, a Hong Kong-based digital shipping rate provider. “If the situation becomes serious enough and carriers choose to divert the route to Africa instead of waiting for the canal to be cleared, importers will obviously experience delays due to the longer transit time,” said Mr. Buchman, “and possibly an increase in prices due to the additional costs associated with the longer route.

The Warehouse Group Ltd.

, a retailer based in North Shore, New Zealand, expects the lockdown to worsen shipping delays the company has faced since late last year due to restrictions linked to the pandemic. “The Suez Canal is likely to be blocked for a few days, which is not going to help,” chief executive Nick Grayston said on an earnings conference call on Wednesday.

If the Ever Given cannot be dislodged quickly, or if the vessel is not seaworthy due to damage to the hull or the weight of its cargo, shipping companies will have to turn away from Africa, extending transit times and increasing fuel mileage, Alan said. Murphy, Managing Director of Denmark-based maritime research firm Sea-Intelligence ApS.

The ships were anchored outside the Suez Canal on Thursday.


Photo:

Khaled Elfiqi / EPA / Shutterstock

A prolonged blockage would exacerbate a persistent container shortage and tie up more ships and crates on the Asia-Europe trade route, Murphy said. “It would force importers to fight for the available containers,” he said, and the problem would spill over into other trade routes the longer the Suez was blocked.

Another alternative route would be to ship goods by rail over the growing land networks that have sprung up between China and Europe. Johannes Schlingmeier, co-managing director of Container xChange, an online marketplace for buying and selling shipping containers, said shipping companies stepped up the marketing of these services this week.

Some US importers who are awaiting shipments from India are bracing for potential delays in the coming months due to the blockade of the Suez Canal, adding to what has already been a difficult year of shipping.

More logistics report

At Cheektowaga, New York, Christmas Central, a predominantly online seller of lights, seasonal decorations and outdoor items, shipments from India of items such as outdoor rugs and lanterns are not are not yet delayed, President Nathan Gordon said. But if ships return to India later than expected, it could affect shipments booked in weeks, he said.

“They haven’t said there are problems yet, but anything is possible with the maritime disasters happening this year,” Gordon said.

Write to William Boston at [email protected] and Sarah Nassauer at [email protected]

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