Economic impact of Suez Canal delays
Yahoo Finance’s Brian Sozzi and Julie Hyman discuss the latest developments of the Suez Canal blockage and long-lasting impacts as a result of delays.
Video Transcript
JULIE HYMAN: It's still stuck. Ever Given, that massive container ship still stuck in the Suez Canal and that is causing of course, all kinds of snarls to shipping around the globe and potentially causing problems for pricing as well. Remember that's a 200,000 ton ship. It's stuck. You've all seen the pictures likely of these sort of tiny by comparison bulldozers, earth moving equipment, trying to get it free.
Latest reporting from Bloomberg says it's going to take at least until next Wednesday to free the ship from the Suez Canal. As a result, we're seeing all kinds of other ripple effects, shipping costs are surging, the price to ship a 40 foot container from China to Europe has almost quadrupled from a year ago. We're watching the grains, we're watching oil, we're watching coffee. All kinds of things going on as a result of this blockage.
And Brian, you know, when this initially happened we kind of said, OK, this is a blip. It's going to be a temporary situation. It's still going to be a temporary situation, eventually they'll get the thing out. It's just going to take longer than expected.
BRIAN SOZZI: Yeah, Julie, I tried to move that thing last night. I just couldn't do it. They just helicoptered me back in time for the show, but no, to your point, now we're starting to see the ripple effects of this ship being stuck. As you mentioned, oil prices have started to creep back up, cost to ship more products, ship products have started to climb. Oil prices are on the rise, grain prices are on the rise.
So now I think the market is starting to understand, this has real world ramifications and you had Caterpillar out this morning saying it may see some product delays and may have to air ship some products just to get them to market in time. And this is the last thing corporate America needs right now. Corporate America is still smack in the middle of a health pandemic here. Already seeing rising inflation for freight in terms of rail and other logistics in the US. This is not what they want to see right now.
JULIE HYMAN: No, definitely not. And I know we're going to talk more about inflation throughout the show but we did get some data this morning for the month of February, the so-called PCE, which is the preferred measure of inflation from the Fed, it was up 1.6% in February. So really we're going to pay more attention to the March and April numbers when you have those dramatic year earlier comparisons but still that's something to consider.
Just a couple other stats about Suez that stand out to me that I was reading about this morning, if ships decide not to go through Suez and instead reroute around the Cape of Good Hope in South Africa, that's going to add about 10 to 15 days to their trips, which is about 6,000 miles. It also can add for a big oil tanker $300,000 in additional fuel costs. So again here, this is a reflection of all the different kinds of ripple effects here. And Brian, as you well know, you and I have talked about it a lot, out in California the ports are already snarled before this even happened.
BRIAN SOZZI: Yeah, you were seeing container buildups and price increases on West Coast ports. We're seeing the likes of Nike have called out, a lot of retailers have called that out, essentially product sitting on docks collecting dust. In large part because of the pandemic. That has really sent supply chains into a havoc and you have new protocols on those docks because of the pandemic, which ultimately delays unloading these ships and putting these products into trucks, into railroads, et cetera.
But again, it is interesting, Julie how the market, it's not really pricing this in. They view this as a short term effect but I think over time these types of events could occur even more. You don't want to see it, but it could. And this is the byproduct of faster supply chains, the impact of online shopping and yes, of course, globalization.
JULIE HYMAN: Yeah. And the ships have been getting bigger as a rule. So that is why things like this happen.
