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Suez blockade – impending lessons

The recent blockade at Suez Canal can never be more untimely than now. The shipping companies, struggle post COVID has worsened and hopes of revival is at least not going to be immediate. The impact of COVID 19 and unprecedented lock down has jeopardized the world supply chain system. We experienced piles of metal containers accumulating at certain ports and scarcity of containers for loading stuffs, elsewhere. We saw trucks inoperative or without work at certain ports and truck demands being overwhelmingly high at some places. Certain ports had to operate beyond its peak capacity to suffice the customer demands. Added to the imbalance in the world logistics operation we had huge congestion at certain International ports, exposing the vulnerability of the long and lengthier supply chain system.

While the world was recovering from the terrible shock, the second wave of COVID is starting to sweep the remnants of the world economy. At such a timely situation, when hopes of future logistics are at peril, we had the SUEZ BLOCAKDE.  We had hundreds of ships stranded across both sides of the canal that will offset the recovering balance of the world maritime industry. Though the immediate direct cost impact of this blockade is estimated, its consequential damage will take time to be estimated. It has devastating consequence, when 12% of the world trade route is blocked. It is a real choke on the throat for the European economy in particular. Around, US$ 9 billion trade materials pass through this canal a day, literally making it around US$ 400 million per hour. The blockade’s immediate effect is that the cost of shipping from China to west coast of America has doubled and china to Europe has tripled. 

The Japanese supply chain management of “JUST IN TIME” has contributed greatly in the success of globalization.  With distant low cost vendors supply chain, the finished products were cheaper and hence reaching worldwide, killing most of domestic industries. With COVID-19 & SUEZ BLOCKADE, the concept of JUST IN TIME will be revisited as we have seen unfinished products piling up, for want of tiny single part. The vulnerability and sustainability of the economy has been super exposed. Without a single gunshot or a terror attack, any economy can be brought to the knees.

This pushes to search to know, how many more Suez type canals are there? You will be amazed to know that at least seven such vulnerable sea routes are there in the global maritime routes. Suez Canal, Turkish Strait of Bosporus, Hormuz Strait, Bab El-Mandeb Strait, Malaccan Strait, Danish Strait and Panama canal. These are the most critical vulnerable choke points on the maritime industry but not the only. Billions of worth trade pass through these routes daily. With these type of mishaps or a planned blockade for few days can jeopardize the world economy and certain nation’s economy can melt down without knowing what impacted them. We are not considering the congested maritime supply hub ports whose blockade can also create similar impacts.

Whether we admit or not, the whole supply chain system is vulnerable and no one can assure its creditability on its worthiness. The maritime cost has gone up already and is bound to move upwards further. This will result in higher product cost making it impossible for manufacturing hubs to sustain. Already, nations have started looking inwards on sustainability over aggressive growth that the globalization was guaranteeing. The look out now is totally different. That is why certain nations have started slowing down their progress and focussing on sustained growth, survivability and self-reliance. We see nations barring to issue new work visas, as sustainability is prioritized over growth.

Military doctrine says that for any military success, the supply chain has to be firm and short. If that applies to national economy too, then the major economies or nations who thumped on their exports and imports growth have to redraw their strategy for their sustainability and survivability.  To redraw the supply chain, we need to redraw the manufacturing policy. Domestic production of essential commodities has to be achieved at whatever cost and all whether round the clock supply chain accessibility has to be ensured to withstand the changing maritime norms.

Is SUEZ BLOCKADE throwing new threats to the global economy? The optimist sees the other way around. This event has triggered the importance of self-reliant and sustainability. That shall pave way for promotion of domestic industry for at least essential commodities across the globe. This will be future drive for the recovery of global economy. Ultimately, we shall be exciting the globalization era and entering self-reliant era. Sea route trade shall be for non-essential and luxurious items. That was how; we were doing trade a century back. Life is cyclic and we have come across a full cycle.  

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Views expressed above are the author’s own.



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