The number of vessels stranded in the canal – a crucial link between Asia, Africa and Europe – or just outside it has increased by more than 40 per cent since Wednesday.

As one of the world’s busiest waterways, “even the slightest delay in traffic can result in congestion and disturb the delivery of goods and commodities on both sides of the canal”, commodities analyst S&P Global Platts said in a note.

“It is not about the single aground ship alone but the entire trading schedule for millions of tons of commodities.”

The blockage will have a ripple effect through manufacturing supply chains, container flows, shipping costs and short-term inventory shortages, analysts said.

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Giant cargo ship causes marine traffic jam by blocking Egypt’s Suez Canal

Giant cargo ship causes marine traffic jam by blocking Egypt’s Suez Canal

“[They] only have enough on hand for a short period, and source components from Asian manufacturers. Even if the situation is resolved quickly, port congestion and further delays to an already constrained supply chain are inevitable,” he said.

“Alternative modes of transportation are more or less out of the question, because airfreight capacity is already tight owing to the pandemic and rail transportation between China and Europe is very limited.”

China could also run out of copper raw material, as well as battery parts such as copper cathodes that come from Europe. Commodities analyst Mysteel Global said if the blockage was not resolved in a few days, China could experience delays of a month in copper shipments.

Shanghai Metals Market general manager Ian Roper said the copper stockpile at Chinese plants will last, on average, another two weeks. But he added China should be able to find suppliers among South American countries, which do not ship through the canal. India, however, could run into more trouble with copper shortages as it had less access to South American sources.

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Efforts to free a giant cargo ship blocking Egypt’s Suez Canal

Efforts to free a giant cargo ship blocking Egypt’s Suez Canal

Copper cathode supplies in Asia could fall but there was enough inventory in China to accommodate the current level of demand, S&P Global Platts iron ore pricing analyst Han Lu said.

Carlos Torres Diaz, Rystad Energy’s head of gas and power markets, said around 1 million tonnes of liquefied natural gas (LNG) could be delayed for delivery to Europe if the blockage lasted for two weeks. That number doubles for a four-week delay.

While some LNG shippers from Qatar were considering the route around the Cape of Good Hope, the journey of more than 30 days, as opposed to 17 days through the canal, would make it unviable for the time being, Diaz said.

Any new delays, including longer shipping times, would send the costs of shipping and goods soaring, analysts said.

Shipping containers becomes new buzz word as coronavirus leaves industry struggling to meet demand

Freight costs for shipments from Asia to the Mediterranean have already trebled since mid-November and shipping capacity had been struggling under the weight of increased demand for goods, as the global economy starts to recover from Covid-19, Capital Economics global economist Gabriella Dickens said.

Data from the CPB Netherlands Bureau for Economic Policy Analysis on Thursday showed world merchandise trade – which rose 2.6 per cent in January, the highest level since October 2018 – was pushing for more shipments largely due to the growth of imports and exports in China and Asia.

“[Data from the CPB] suggested that world trade had already shrugged off rising shipping costs up to January … but if the grounding of the huge container ship in the Suez Canal is not resolved soon, it could push freight rates even higher, causing a further rise in manufacturers’ costs and exacerbating temporary supply shortages,” Dickens said.

The delays would also choke the flow of containers.

There is a severe imbalance in container distribution between different markets, with exporters in Asia scrambling to find available containers for goods, while in the United States, Britain and Australia, ports are struggling with a lack of infrastructure and too few workers to handle surging inbound goods. That then delays the return of empty containers.

The blockage will worsen the situation, particularly for European ports such as Rotterdam and Antwerp, said Greg Knowler, senior Europe editor for market intelligence firm IHS Markit.

“Cargo owners can expect cancelled sailings, ports being skipped, and an increase in the amount of cargo rolled over to later sailings at transshipment ports in Asia,” he said.

“Congestion across Europe from next week is inevitable, it is just the extent of the delays that remains to be seen.”

Fitch Ratings’ chief economist Brian Coulton said these could constrain the recovery in global growth in the near term, but this would probably be made up for in the second half of the year. In the short term, the delays from the canal would find their way into higher prices for goods.

“The very rapid bounce back in world trade was already running up against supply-side bottlenecks in the semiconductor industry and in shipping container logistics … This event will only make this worse,” he said.

 “Ultimately merchants will find alternative routes to move stuff around the globe … but this will add extra costs. Headline inflation rates are going to jump quite a lot in the next couple of months given the rise in trade costs, higher commodity prices and base effects from the Covid-shutdown last April.”