2021 Suez Canal blockage resulted in $89 million loss to Maersk Line
The blockage of the Suez Canal in 2021 caused a loss of nearly $89 million to the shipping company Maersk Line, a new study has estimated. The container ship Ever Given ran aground in the Suez Canal on March 23, 2021. The blockage lasted six days and caused significant logistical disruptions worldwide. Around four-fifths of international trade is carried by sea, and on an average day around 50 container ships pass through the Suez Canal.
A European research team, in collaboration with the School of Business, Economics and Law at the University of Gothenburg, analysed ship data to develop a model that calculated the economic and environmental consequences of disruptions in maritime logistics.
“The blockage highlights the vulnerability of our global supply chains and the huge costs that can result from a disruption. Our findings underline the need for robust contingency plans and alternative transport routes to minimise future risks,” a statement by the University of Gothenburg quoted Kevin Cullinane, one of the authors.
The study’s results are based on data from Maersk’s fleet, which accounts for one-third of all commercial ships affected by the blockage. A total of 69 of the company’s ships were impacted, either through rerouting via the Cape of Good Hope or because of delays at the Suez Canal.
Of Maersk’s total loss of $89 million, the cost of holding container inventories was the largest expense at $76 million. Ship costs and environmental costs accounted for the remainder.
Ship costs are calculated by summing the daily capital, operational, container, and fuel costs during the period of the blockade. Environmental costs are calculated by multiplying the amount of additional carbon dioxide emissions by $100 per tonne of CO2, which is the European Commission’s standard external cost for the transport sector, the statement said.
It added that the blockage increased the carbon dioxide emissions of Maersk’s fleet by 44,574 tonnes due to longer voyages and waiting times. In addition, the Suez Canal Authority lost $5.9 million as a result of the ships’ detours.
The methods used by the researchers in the study can be used to estimate other logistical disruptions, such as those currently occurring in the Red Sea due to attacks on cargo ships by Houthi rebels. Many ships are now being rerouted around the Cape of Good Hope, and shipping companies are being forced to change their usual route via the Suez Canal.
“Given the large number of ships being rerouted over an extended period of time, the consequences are much greater now, both in terms of inventory holding costs and carbon dioxide emissions. Researchers can use our framework to analyse the additional costs of this major disruption to global maritime trade,” the statement quoted another author, Theo Notteboom.
The costs of maritime supply chain disruptions: The case of the Suez Canal blockage by the ‘Ever Given’ megaship is published in the International Journal of Production Economics. Authors are Nguyen Khoi Tran, Hercules Haralambides, Theo Notteboom, and Kevin Cullinane.