Suez Canal blockage caused Maersk to face $89M loss, increased CO2 emissions

The 2021 Suez Canal blockage resulted in a loss of nearly $89 million for Danish shipping giant Maersk Line, a new study found.

The study, titled “The costs of maritime supply chain disruptions: The case of the Suez Canal blockage by the ‘Ever Given’ megaship”, was conducted by a European research team in collaboration with the School of Business, Economics and Law at the University of Gothenburg. As explained, the methodology can also be used to analyze the crisis in the Red Sea.

To remind, on March 23, 2021, Ever Given—one of the world’s largest boxships at the time—ran aground in the Suez Canal. The blockage lasted six days and caused significant logistical disruptions worldwide.

The 400-meter-long and 59-meter-wide Ever Given, too big to allow other ships to squeeze through, was stuck in a narrow point of the waterway which resulted in the build-up of vessels on both sides.

Around four-fifths of international trade is carried by sea, and on an average day around 50 container ships pass through the Suez Canal.

By analyzing ship data, the research team developed a model to calculate 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,” Kevin Cullinane, Professor at The School of Business, Economics and Law at the University of Gothenburg, said.

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.

“The research shows not only the significant economic risks in international logistics, but also the substantial impact that disruptions have on day-to-day operations,” Hercules Haralambides, Professor at the Dalian Maritime University, Erasmus University Rotterdam, and Sorbonne Centre for Economics, commented.

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.

Specifically, 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 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.

Due to confidentiality, the researchers did not have access to data from all container ships affected by the blockage.

The study’s methodology can be applied to other logistical disruptions, such as those that were occurring in the Red Sea due to attacks on cargo ships by Yemeni Houthi group. Many ships were rerouted around the Cape of Good Hope, and shipping companies were 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,” Theo Notteboom, Professor at the University of Antwerp, Ghent University, and Antwerp Maritime Academy, concluded.

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