Reference no: EM133047499

The Suez Canal Relevance

The Suez Canal connects European markets with Asia, 10 - 12% of the planet's commercial traffic, and is key to oil and natural gas traffic, since refined oil products in Europe and crude oil from the North of Europe pass through it. At the same time, The Suez Canal is responsible for Africa and the Black Sea's ports, as well as manufactured goods, electronics and heavy machinery between Asia and Europe (Gordon Smith, B. 2021). An average of 39 large container ships pass through the Suez Canal per day. In total, there are 1,550 ships per month and there were 18,597 ships in 2020. The value of the cargo stranded there was 12 billion dollars according to a survey between consignees and freight companies carried out by The Wall Street Journal, which estimates that 2% of global crude production is stuck there inside the canal (Gordon Smith, B. 2021).

The interruptions caused by the pandemic in addition to the blockage has cost thousands of millions of dollars to the global economy. Its stagnation has brought a series of consequences that will end up affecting the pockets of millions of people. It is estimated that at least 369 vessels were waiting to pass, including container freighters, oil and natural gas tankers (Gordon Smith, B. 2021).

Impacts of the Suez Canal Blockage

Global supply chain impact

The queue of ships waiting to cross the channel after the obstruction of the Ever Given reached more than 40 freighters (Clark, A et al. 2021). The vast majority transported basic products, from grains and cereals to so-called "dry" products such as cement. There were also 24 oil tankers, eight ships carrying livestock and one water tanker, according to Bloomberg (Clark, A et al. 2021). The cessation of the canal's operations again caused congestion in the ports (Clark, A et al. 2021).

The main problem originated because the supply chains of thousands of stores were affected and this directly impacted the consumer's pocket (Clark, A et al. 2021). Every day that the canal was closed, the container ships and the oil tankers did not deliver food, fuel and manufactured products because no goods were exported from Europe to the East and vice versa (Clark, A et al. 2021).

Although all of the disruption caused by the blockage was very interesting to see how the World Trade Organization approached and provided help to the implications caused by the obstruction of the Suez Canal. WTO helped to keep trade flowing throughout the crisis. It became evident that international trade is somewhat robust, susceptible and almost completely relies on successful global trade for its commerce.

International financial impact

One of the most relevant world insurers stated that every single day that the Suez Canal was obstructed, the global annual trade growth decreased by 0.2-0.4% and it cost $6-10 billion dollars (New Zealand Foreign Affairs & Trade, 2021). Its impact was so significant that international trade was severely affected. Plenty of companies in the Middle East and Asia had to find alternative routes to transport their goods which created massive product shipment delays (New Zealand Foreign Affairs & Trade, 2021).

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