Without Shipping, the Global Economy Sinks
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1 year ago

Without Shipping, the Global Economy Sinks

The Suez Canal blockade is a reminder that sea freight still keeps the global economy running—and leaders and consumers ignore it at their peril.

suez ever given ship stuck
A view of the stuck container ship Ever Given from a village near the Suez Canal on March 28. MAHMOUD KHALED/GETTY IMAGES

The superfreighter blocking the Suez Canal has been refloated, but the canal’s weeklong standstill has opened the eyes of the worldwide public to the vulnerability of global shipping. Billions of people depend on each cog in the shipping process for their livelihoods—it involves everything from oranges to machinery to port workers and complex software organizing each step—but ignore the many vulnerabilities until something goes wrong.

Indeed, the Ever Given’s highlighting of canal blockades is a useful reminder that many other mishaps can disrupt global shipping. During World War I, the British Royal Navy carried out a blockade of German-bound shipping so effective it caused starvation, and in 1967, then-Egyptian President Gamal Abdel Nasser closed the Gulf of Aqaba to Israeli shipping, a move that helped spark the Six-Day War. Consider the prospect of a hostile government spoofing vessels’ navigation systems. And what if China, the Philippines, Indonesia, or Russia stopped supplying the world with sailors?

 

In 1975, an average of 26.6 ships made their way through the Suez Canal every day. By 2019, the figure had virtually doubled, to 51.7 ships per day. And by 2019, the ­ships came laden with more oil, fruit, car parts, animals, grains, construction equipment, clothing, and basically every other item global companies and consumers need every single day—amounting to an average of 3,307 tons daily, compared to 240 tons in 1975.

Container ships have kept growing along with their cargo: The Ever Given is one of the largest container ships in the world and was stuck in the canal fully loaded, with 20,000 20-foot equivalent units (TEU) (roughly speaking, 20,000 shipping containers). “The blockage in the Suez is not a huge surprise to those of us in the industry,” said Cormac Mc Garry, a maritime analyst for Control Risks, a global risk consultancy. “We’ve been warning [of] a situation like this for a long time because container ships are getting so big. There are only a handful of ports in the world that can receive a vessel like the Ever Given.”

In 1975, an average of 26.6 ships made their way through the Suez Canal every day. By 2019, the figure had virtually doubled.

“The bigger the ships get, the bigger the risk,” Mc Garry said. In container shipping, margins are tight, and the cost of shipping is enormous, so having bigger ships makes sense for the company. Ten years ago, the biggest ships carried 10,000 containers; now, there are ships that carry more than 20,000 containers. It’s a ceaseless march.” Peter Sand, chief shipping analyst at BIMCO—the world’s largest trade body for the shipping industry—said container ships’ size could grow to 24,000 TEU.

Twelve percent of global shipping passes through the Suez Canal; marine shipping, in turn, accounts for 80 percent of the world’s trade in goods. If a ship gets stuck in the canal, an average of 51.7 ships would be held up every single day it stays there or the ships will have to turn around and take the much longer trip around the Cape of Good Hope. That’s precisely what has been happening. By the time the Ever Given was refloated, 372 vessels with loads of more than 10,000 TEU (plus additional smaller ones) were waiting to sail through the canal, while some—including the ultra-large HMM Dublin, with a near-24,000 TEU capacity—had unsurprisingly decided to sail toward Africa’s southern tip.

The Ever Given’s unintended blockade of the narrow canal has caused a profoundly sea-blind global public to take a sudden interest in global shipping, entertaining itself with memes featuring a tiny excavator next to the stranded Ever Given. But now that Egyptian officials’ and foreign experts’ desperate struggle to dislodge the 400-meter-long vessel bound for Rotterdam has succeeded, policymakers and regular citizens would do well to look beyond the narrow canal linking the Red Sea and the Mediterranean—because the world of shipping, which we are all so dependent on, harbors plenty of other risks.

“Shipping is a comfortably forgotten industry,” said Simon Lockwood, a shipping expert with the global insurance brokerage and advisory firm Willis Towers Watson. “Now, the Suez Canal is getting a lot of attention … There are incidents in other waters as well, which most people are simply not paying attention to,” he adds, noting only 12 percent of ships transit through Suez. “For example, there’s a huge increase in attacks on shipping in the Gulf of Guinea. In the Persian Gulf, an Israeli car carrier was allegedly hit by missiles a couple of weeks ago. There are a lot of proxy wars going on with vessels as targets, essentially constant attacks on the supply chain,” Lockwood points out.

The Israeli ship, traveling from Tanzania to India, drifted for several hours before being able to continue its journey. In February, another Israeli container ship was hit by an explosion in the Gulf of Oman. Israeli media reported that Iran was behind the former, and Israeli Prime Minister Benjamin Netanyahu blamed Iran for the latter. Predictably, Tehran denied the accusations.

original - https://foreignpolicy.com/2021/03/31/suez-canal-ever-given-shipping-global-economy-sinks/