The Ever Given container ship stuck in the Suez Canal
Photographer: Ahmed Hasan/AFP/Getty Images
Six thousand miles from the Suez Canal in the U.S. Midwest, the chief executive of a multinational maker of industrial adhesives has one eye on the clogged trade artery and another on the ways to minimize the fallout on his $2.8 billion company.
“It just adds to the ongoing stress in the supply chain” for chemicals, Jim Owens, president and CEO of St. Paul, Minnesota-based H.B. Fuller Co., told Wall Street analysts as salvage crews failed to clear the Egyptian waterway late last week. “Is it going to transform everything in a negative way? No, but it’s an issue that we’re watching very carefully.”
So is the rest of the trade world. Efforts to free the beached Ever Given are nearing a pivotal stage, relying on machines and human engineering but also hoping for a celestial pull. High tide through Monday offers perhaps the best chance yet to float a steel behemoth that’s four times heavier than the iconic Sydney Harbour Bridge.
For the global economy, hanging in the balance daily is about $10 billion in commodities, industrial inputs and consumer products on ships that ply the canal, with supply-chain fears directed mostly at Asian exporters and European importers. The broader economic costs — small thus far in relation to $18 trillion in global goods trade annually — are compounding with each day the canal remains closed.
“It is a severe blow to the already constrained supply chains that were just recovering from the Covid pandemic,” Rahul Kapoor, vice president of maritime and trade at IHS Global Insight in Singapore, told Bloomberg Television on Friday. “If it goes into weeks, it could turn into what we could call catastrophic.”
Vincent Stamer, an international trade expert at Germany’s Kiel Institute for the World Economy, said the delays thus far will cause economic damages, “but it’s too early to quantify them.”
It’s not too soon for companies to be making other plans. A few container ships and oil tankers are already avoiding the clogged shortcut between the Red Sea and the Mediterranean, and instead detouring around the Cape of Good Hope at the southern tip of Africa. That adds more than a week to the Asia-to-Europe journey and hundreds of thousands of dollars in fuel costs, but it’s a hedge against a potentially even longer delay in transiting through the Suez.
About 320 vessels were still waiting on Saturday for the passageway to reopen.
Companies from the Swedish furniture giant Ikea to Illinois-based Caterpillar Inc., the global maker of construction equipment, are among the customers of ocean freight weighing alternative sourcing plans.
In the short term, the added stress on trade will translate into higher transportation costs, tighter supplies, and more delivery delays for producers and purveyors of goods.
Even before the incident that closed the Suez, input costs in the euro area rose at the fastest pace in a decade, while measures of prices paid and charged by U.S. businesses advanced in March to fresh records as shortages of materials and disrupted supply chains sparked inflation concerns.
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Over the longer run, it may force a rethinking about the dangers of too much globalization and of supply chains exposed to too much unforeseeable risk.
Overestimating those dangers might be a mistake, though, said Robert Koopman, chief economist of the World Trade Organization in Geneva. He sees the Suez situation as another test that the global economy will battle through in the weeks ahead, but will ultimately pass.
The giant, fully loaded ship is “a great photo op,” he said. “But I wouldn’t get too excited about the daily trade impact.”
Koopman said the canal blockage doesn’t mean global supply chains are at risk of disintegrating — it’s all part of doing business in today’s interconnected global economy. Whether it’s a winter cold snap in Texas that snarls production of petrochemicals, container shortages on Transpacific trade routes, or a fire at a chip-making plant in Japan — disruptions happen all the time, and companies adapt.
‘Real Risks’
“There are real risks out there,” Koopman said in an interview on Friday. “They have to be heard about and paid attention to. I wouldn’t take it as instructive about the risk of over-globalization.”
International trade in goods has been a rare bright spot over the past year, and returned recently to pre-pandemic levels. That’s the danger with the latest supply shock — it could further fatigue already strained networks of ships, ports, trains, trucks and warehouses.
According to a report from Allianz Research, each week of no traffic through the Suez Canal could dent global trade growth by 0.2 to 0.4 percentage point. Even before the Suez incident, supply-chain disruptions since the start of the year might trim 1.4 percentage points from trade growth — about $230 billion of direct impact, Allianz said.
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Ships waiting in the Gulf of Suez to cross the Suez Canal at its southern entrance on March 27.
Photographer: Mahmoud Khaled/AFP/Getty Images
“The problem is that the Suez Canal blockage is the straw that breaks global trade’s back,” Allianz said in the note.
Caught in the turmoil are about 6,200 container ships that carry more than 80% of merchandise trade. Dominated by about a dozen companies based in Europe and Asia, they’re already operating at full capacity and charging record-high rates for the 20- and 40-foot-long boxes they’re struggling to align with global demand.
The Cost of Cargo
Container shipping rates have soared and stayed elevated since mid-2020
Source: Freightos Freight Index via Bloomberg
*FEU stands for 40-foot equivalent units of shipping containers
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Diverting shipments around Africa for an extended period would cut about 6% of global container capacity from the market — roughly the equivalent of removing from service 74 ultra-large vessels like the one that burrowed into the banks of the Suez, according to a note late Friday from Copenhagen-based Sea-Intelligence.
“Such an amount of capacity absorption will have a global impact and lead to severe capacity shortages,” Sea-Intelligence CEO Alan Murphy said. “It will impact all trade lanes.”
Just how badly is difficult to say, as the Port of Rotterdam can attest. As last count on Friday, 59 ships caught in the Suez snarl were bound for Europe’s biggest seaport. The vessels might take a week or two to get there, or longer.
And they may come in manageable waves or in bunches that exceed the port’s capacity. The ships’ captains might radio an arrival well in advance, or maybe not.
Ready in Rotterdam
All that fresh uncertainty means “we have a challenge ahead,” said Rotterdam spokesman Leon Willems. “The number of containers they carry will be put on trains, barges and trucks and stored in depots — but these depots are quite full at the moment.”
At Minnesota’s H.B. Fuller, which gets about half its revenue outside the U.S., Feburary’s winter storms in Texas meant the temporary closing of some facilities, though Owens said on a conference call Thursday the company should make up for the lost business “and then some.” Now, staring down the troubles in the Suez, it has a team monitoring “exactly what materials that our suppliers have that might be on those ships,” he said.
“They’re well in the mode of managing those issues and a ship stuck in the Suez is exactly what they are set up to do,” Owens said. “They’ll manage it just fine.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
