Since the beginning of the Covid-19 pandemic, the world learned some hard lessons about the global supply chain and how incredibly fragile it is. Those painful lessons have reemerged in past week as a single ship ran aground in the Suez Canal, shutting down traffic in both directions. The vessel causing the blockage, the Ever Given is one of the world’s largest container ships, with space for 20,000 metal boxes carrying goods across the sea. The Suez Canal is a vital channel linking the factories of Asia to the affluent customers of Europe, as well as a major conduit for oil.
Over the past few decades companies have moved away from stockpiling goods in warehouses and relied on the power of the internet as well as the global shipping industry to create “just in time manufacturing”. That is what caused led to both medical providers and retailers being woefully undersupplied as Covid-19 began. A major e-commerce boom, as well as less warehouse and industrial space combined with shipping specialization put a massive strain on the shipping industry, which grows every day the Suez Canal is blocked. The dislodging efforts are expected to go well into next week.
Two major West Coast ports, the Port of Los Angeles and the Port of Long Beach has faced almost half a year of bottlenecks. There is growing fear that canceled sailings, container shortages and higher freight rates are now inevitable. Already vessels that were scheduled to cross the Canal are being rerouted on costly and time-consuming detours. In fact, Caterpillar, the largest US machinery producer is facing shipping delays and is considering airlifting products if necessary.
In the US, the trade crises coincides as the Biden administration prepares to release a robust infrastructure package. Our infrastructure is in terrible shape and needs to be overhauled and reimagined for the next century. However, we can not forget the lessons of the past year. At the heart of any infrastructure package must be mechanisms to reestablish US manufacturing and localize our supply chains. And to those concerned about the price tag consider that per a Bloomberg analysis, each day the blockage continues goods worth almost $10 billion are held up.
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