The Lasting Effects of a Temporary Trade Stoppage

May 13, 2021 | Nicole Johnson-Barnes, CFA, Senior Research Analyst, Global Equities, Rodrigo De La Peña Alanis, Performance Analyst

Line chart showing Shanghai Containerized Freight Index level. Chart subtitle: Global shipping rates have conitnued to surge, exacerbated by the Suez Canal blockage. Chart description: Y-axis shows Shanghai Containerized Freight Index in USD, from $500 to $3,500. X-axis shows years from 2017 to present (2021. Index level line hovers across most years shown from around $700-$900, but steadily then sharply increased in 2020. After slightly decreasing in early 2021, it again increased and reached a peak in early May and continues to hover at over $3000. Chart source: Bloomberg as of May 11, 2021.

In late March, one of the busiest waterways in the world came to a standstill after the Ever Given, a 1,300-foot container ship, became lodged in the Suez Canal. Nearly 30% of the world’s daily shipping container freight passes through the Suez Canal, and with supply chains already disrupted amid the COVID pandemic, the timing could not have been worse. While only a one-week stoppage, with approximately 7% of the world’s oil and 12% of global goods trade flowing through the canal, it is estimated that each day lost delayed more than $9 billion worth of goods.¹

In this Chart of the Week, we analyze the impact that the Suez Canal closure had on maritime shipping costs and the contribution to inflation. The chart above shows the daily price movement of the Shanghai Containerized Freight Index (SCFI). As one of many proxies for global trade and ocean freight health, the SCFI reflects the weekly shipping spot rates of Shanghai container exports along 15 major trade routes, including Shanghai to the United States (east and west coasts), Europe, South Africa, and South America. In contrast to the highly-cited China Containerized Freight Index (CCFI), the SCFI focuses solely on exports in these 15 individual trade routes, rather than nationwide import and export container transport, which would include more contractual and futures rates. Rates surged throughout 2020 amid increasing demand for goods over services and tighter supply. The blockage, which may take months to fully recover from, combined with pent-up demand and economic re-openings has exacerbated the imbalance and sent SCFI spot shipping costs up another 20% over the last month. Rising inflation has been an increasing concern for investors this year and, given current dynamics, we do not expect the contribution from higher global shipping rates to abate anytime soon.

Print PDF > The Lasting Effects of a Temporary Trade Stoppage

¹Lloyd’s List Intelligence

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Nicole Johnson-Barnes, CFA
Senior Research Analyst, Global Equities

Get to Know Nicole

Rodrigo De La Peña Alanis
Performance Analyst

Get to Know Rodrigo

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