Enormous damage from blockade: That’s how important the Suez Canal is for Germany

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Many ships are stuck in traffic because of the giant container that got stuck in the Suez Canal. For the German economy this is an enormous problem that is getting bigger every day.
A huge container ship is stuck in the Suez Canal and the blockade is likely to drag on. The end of the work to get the “Ever Given” back on the road is not yet in sight. The damage increases with every day the giant, which is 400 meters long and more than 50 meters wide, blocks the canal. Shipping on the canal has been suspended until further notice – as a result, a traffic jam has formed in front of one of the most important waterways in the world, which is growing every hour. More than 200 ships are already waiting for the passage. To put it into perspective: around 19,000 cargo ships pass through the canal every year, which is an average of more than 50 a day.

The 193 kilometer long waterway connects the Mediterranean with the Red Sea, making it the shortest route between Europe and Asia. Container ships, tankers and bulk carriers use the passage. According to estimates by the shipping trade magazine “Llyod’s List”, goods worth around 9.6 billion dollars are transported through the canal every day. The largest ships can transport up to 20,000 containers.

There are not many ways around the Suez Canal in shipping – at least not for an oil tanker from Saudi Arabia or Iraq that is heading for Europe or the USA on a tight schedule. The canal shortens the sea route from Europe to India and on to East Asia by around 7,000 kilometers; the detour via the Cape of Good Hope costs a ship at the normal speed of around 16 knots (around 30 kilometers per hour), depending on the route, around a week and a half . That is expensive: ships like the “Ever Given” are usually chartered by container shipping companies with the associated crew from the owner. Tens of thousands of dollars are due for one of the giants – per day.

Increasing the speed on the longer route is also problematic. The container giants can travel at speeds of up to 23 knots – but the higher the speed, the fuel consumption and thus the costs increase extremely. The ships’ machines are designed to work as fuel-efficiently as possible at low speeds.

“Every port will notice that”

Around twelve percent of the global freight volume and around 30 percent of the container volume therefore flow through the Suez Canal. The route is particularly important for Germany as an export nation. China has been Germany’s most important trading partner for years, with a mutual trade volume of more than 212 billion euros last year. About two thirds of all imports and exports between the Federal Republic and East Asia take the ship route.

According to the Kiel Institute for the World Economy, 98 percent of container ships pass through the Suez Canal when they are en route between Germany and China. This means that 8 to 9 percent of German goods imports and exports run through it.

Electronics, machines and associated parts as well as textiles are mainly moved from Asia to Europe on container ships through the canal. “Of course, oil is also transported through the Suez Canal,” says IfW expert Vincent Stamer. But Germany gets oil mainly from Russia, Great Britain and Norway. “That’s why it plays a smaller role for Germany,” says Stamer. For other countries, however, the passage is of enormous importance: 600,000 barrels (152 liters each) of crude oil are transported through the canal from the Middle East to Europe and the USA. The oil route from the Atlantic Basin to Asia also runs through the canal – with a volume of 850,000 barrels a day.

“Every port in Western Europe will notice,” said a spokesman for the port of Rotterdam, the largest in Europe. The traffic jam is likely to cost the German economy dearly. “That will keep us busy for at least another month or two,” said supply chain expert Joachim Schaut from the logistics service provider DB Schenker. The damage is enormous.

Limited capacity

The incident has not yet had any serious impact on the port of Hamburg. The blockade could, however, become a problem for Europe’s third largest port of call for seagoing vessels. It means that fewer ships initially come to Hamburg. As soon as the path is clear again and the traffic jam clears, a large number of ships suddenly appear at the mouth of the Elbe. Since the space for loading and unloading ships at the terminals in the port is limited, traffic will jam when entering the Elbe – this will not only result in further delays.

“After its resolution, the problem in the Suez Canal will immediately be carried over to the European ports and their terminals,” says Frank Huster, General Manager of the Federal Association of Freight Forwarding and Logistics DSLV. With limited capacities and parking spaces, these would then have to “handle a gigantic, delayed container volume within a very short time and distribute it to the seaport hinterland transports by truck, rail and inland waterway”.

The congestion caused by the blocked Suez Canal is already costing the German economy dearly. The chemical industry and mechanical engineering companies are warning of a disruption of the supply chains, which are already under pressure from the corona pandemic. Even if the Ever Given “is floated again soon and the important waterway becomes navigable again, logisticians expect weeks of problems at the German ports.

“The disruption comes at a bad time,” said the German Chemical Industry Association (VCI). “Capacity utilization in the chemical industry is high. The demand for deliveries from Asia is correspondingly high.” The indirect effects are likely to be even stronger, fears VCI chief economist Henrik Meincke: “If our industrial customers in Europe have production stops because there are no deliveries from Asia, the demand for chemicals falls”.

Industry association worried

The machine and plant manufacturers are also looking at the accident in the canal with concern. “The Asian markets are currently the growth drivers for mechanical and plant engineering,” said the chief economist of the industry association VDMA, Ralph Wiechers. “In terms of exports, the congestion in the Suez Canal may mean delays in delivering machines, machine parts and components to Asian customers.” Even without this disruption, the industry is already feeling bottlenecks in supplies from Asia – especially in electronic components and semiconductors. “Depending on the chosen transport route, there could also be tightening here,” said Wiechers. “Since sea freight is en route for a long time, the current situation on the Suez Canal will probably only become noticeable in a few days.”

The Federation of German Industries (BDI) is therefore concerned. “Central supply chains are stalling due to a lack of containers, unpunctual ships and a lack of transport capacity, while costs are rising,” said General Manager Holger Lösch. “This already has a negative effect on the production processes in the industry.”





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Enormous damage blockade important Suez Canal Germany

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