Apr 2, 2021 - Economy

The Suez Canal is clear, but shipping is still broken

Illustration of shipping containers sacked like Jenga blocks with a hand removing one

Illustration: Sarah Grillo/Axios

International shipping and supply chains are in rough shape, even without a container ship lodged in the Suez Canal.

Why it matters: The pandemic threw a wrench into the gears of a global network that was already struggling with oversized ships and unbalanced product flows. Given how long it takes for the system to recover from any kind of shock, the echoes of the Ever Given disruption are likely to reverberate for months.

The pandemic caused demand for services to plunge while demand for goods — much of which are imported by ship — spiked.

  • The sheer quantity of goods moving east across the Pacific already dwarfed exports in the opposite direction, and the pandemic exacerbated that trend.

How it works: Enormous container ships run on schedules that are worked out sometimes years in advance. The industry flourishes in times of predictability, and tends to come unstuck during moments of unpredictable demand.

  • Bottlenecks have built up, especially in Southern California, with ships waiting weeks to unload their cargo. Once they're unloaded, they rush out of port quickly to allow a new ship in — so quickly that they often don't have time to reload, leaving potential U.S. exports stranded on domestic shores.
  • Because the ships are so large, their maximum speed has been reduced to the point at which they cannot make up for lost time.

The bottom line: A system of small and nimble container ships could have recovered much more easily from the Suez delays. That's not the system we have.

  • Expect U.S. retailers to continue to complain about shipping delays on earnings calls for the foreseeable future.
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