16 ms·

Lots of articles quote a $XXX billion dollars per day figure, but those numbers are normally for "worth of goods delayed" which, while interesting, doesn't tell

• iujjkfjdkkdkf 6y ago
  Agreed that just quoting the delayed value does not tell the whole story. But it could be a pretty good proxy: to some approximation, everything in the supply chain would be set up to work with the 9.6 Bn daily flow of value - everybody's financing payments, payroll, working capital, etc. The time is gone. Just like if you had to take two weeks off (unpaid) because you were sick, you could work more later to get that money back, and recover some of it if you work overtime, but you still missed that window to make money.
• ufmace 6y ago
  Probably the actual cost will require an army of accountants and lawyers at a dozen major logistics corporations arguing with each other for months to even try to compute. I doubt us regular uninvolved people will ever get a "real" number. How do you even try to calculate and reveal the cost associated with say a manufacturer in the middle of a supply chain deciding to source their parts from a different vendor for this run because their usual source was delayed due to the Suez blockage and they didn't want to leave their factory idle?
  • ape4 6y ago
    Perhaps adding up all the penalties all the delayed ships have to pay could cover it.
  • chipsambos 6y ago
    Agree it's incalculable, I don't mean that in the "it's too big of a number" sort of way but in the "we can't possibly know" kind of way: 1) The scale and depth of the disruption makes it impractical to figure in any kind of accurate way and 2) The disruption will have introduced hypotheticals that nay spiral out themselves (butterfly effect style) e.g. some retailer may have lost a customer who went elsewhere, some supplier may have lost a retailer who went elsewhere, etc
    • lisper 6y ago
      You can get a rough idea by thinking of this as if it were a natural disaster, and from that perspective I think the toll is probably not too bad. No casualties, very little property damage, and a week is not really all that long. However... that is no excuse to shrug this off. We were very, very lucky that it was only a week. The ship could easily have broken in two, which would have been a catastrophe of the first order and likely shut the canal down for a year. The world dodged a major bullet here.
      • nowandlater 6y ago
        That's no joke. Salvage operations is such a fascinating topic, which I'm sure many (me included) found themselves quickly obsessed with. The sagging and hogging threshold of this ship is the critical key here. I'm curious how close/or not the hull came to being compromised.
        • Animats 6y ago
          That's why Smit has naval architects on staff, and the program Hecsalv.[1] They will have calculated the limits of how much the stern could be pushed without damaging the bow before pushing it. [1] https://www.herbert-abs.com/hecsalv https://www.herbert-abs.com/hecsalv
      • iso1210 6y ago
        The canal revenues were down about $15m/day. If it really cost $7b a day, then Egypt is massively undercharging.
        • Taek 6y ago
          Not necessarily. I pay only $1 a day for water, but if you stop giving me water for 7 days the damages are going to be a lot more than $7. That doesn't mean it's reasonable to charge me more than $1 per day for water. Obviously an extreme example, but the situation with this ship is likely similar. The damages probably far exceed the $15m/day in revenue (though I suspect they are far lower than $7b per day).
  • mschuster91 6y ago
    Probably the actual "damage" that was caused will be given by the insurance companies as a sum of claims covered, but there will be a lot of companies that simply have to eat the loss incurred by idling factories and the likes because their supply contracts allow for delivery delays or because pursuing coverage isn't worth the effort (e.g. for those who still had sufficient stock to cover a week of delay and no "real" damage occurred). A many weeks long shutdown (in case they had to unload the Ever Given) would be many orders of magnitude more expensive.
    • bkor 6y ago
      > but there will be a lot of companies that simply have to eat the loss incurred by idling factories and the likes Factories will know enough in advance of this problem. They can fly over some supplies to keep the factory running. It's entirely normal to do this. They usually do _not_ idle or shutdown the factory. Who pays is for lawyers and so on. A shipping company will know about these clients and prioritize that cargo.
  • riverageraldo 6y ago
    This makes me question that shouldn't we have another canal built? Like if so much of the world's economy depends on this route shouldn't we build an extra canal to speed up the transportation and also act as a redundancy
    • flatiron 6y ago
      Where do you propose building this extra canal?
      • adrianmonk 6y ago
        Cue Elon Musk promising to build a tunnel version of it for $5 million total cost, opening fall 2022.
        • creaturemachine 6y ago
          Of course everything has to be repacked into little tubes and back into containers on the other end, but let's not let these things get in the way of a solid plan. Elon Musk!
    • onei 6y ago
      It's a lot further to dig, but the next best thing would be to dig from the Persian gulf through Iraq, Syria and probably Lebanon. Not forgetting half the Persian Gulf is Iran. It's not exactly the most stable geopolitical area.
      • dvirsky 6y ago
        I'm not sure there's a path that's flat enough to make it practical even if everything else falls into place somehow.
      • InitialLastName 6y ago
        A quick look suggests that the Tigris is mostly navigable up to Baghdad, which would get you halfway there. As an alternative (and ignoring the obviously substantial geopolitical concerns), is there a geographic reason not to dig a canal on the other side of the Sinai from, say, Aqaba to Rafah? If you had to dig that far, it would seem to be the next best option.
  • interestica 6y ago
    So by attempting to calculate it, the cost goes up higher.
  • dfsegoat 6y ago
    For spoilage etc., most of it would be insured, I assume, so insurance claims would likely be a solid proxy for estimating one aspect of impact.
  • social_quotient 6y ago
    I'm gonna assume the insurance companies will know by the time this is all over.
  • tw04 6y ago
    I'm not sure the collective "we" will ever truly know. I'd imagine a LOT of that livestock died and they aren't going to be jumping up and down to volunteer how many/much given the negative PR. If they did divulge that would probably be the easiest jumping off point for hard losses.
  • deleted 6y ago
    [deleted]
• signal11 6y ago
  I'd start by computing the number of ships that went around the Southern tip of Africa as a result of the stuck ship. I wonder how much the cost of extra fuel and food/pay for all of those ships doing additional miles will be? And the resulting increase in wholesale/retail costs? Regarding penalties re late delivery, I'm less worried about that. Cargo ships always have language about loss and force majeure. I think a stuck ship would qualify as force majeure. And a week shouldn't affect most perishables e.g. grain, that go into containers.
  • GordonS 6y ago
    Container ships burn horrible, cheap bunker fuel, and the shipping industry is infamous for hiring crew from low-income countries like the Philippines, paying them a pittance, and treating them like modern-day slaves. I'd strongly suspect that the costs for spoilage and knock-on effects from late delivery etc would outstrip crew and fuel costs by a large margin.
    • itismetheidiot 6y ago
      Filipino Masters and Chief Engineers are being paid north of $8500/month. Evidently you are not well informed.
      • GordonS 6y ago
        I don't doubt a select few senior people are well paid - but there are many, many more junior crew members that do not fit that description. Also - rude.
      • Loughla 6y ago
        I'm not sure OP was talking about masters and chiefs (chiefes? Why does that look weird spelled both ways?). I'm certain s/he was talking about juniors on the ships.
  • PeterisP 6y ago
    I believe that we can simply look at the channel fees lost due to the downtime - as far as I understand, the fee for using the channel is intentionally close to "the cost of extra fuel and food/pay for all of those ships doing additional miles", a bit lower but not much lower than the alternative of going around Africa.
• philip1209 6y ago
  Also, are there any paths for supply chain interruption insurance to kick in?
• stcredzero 6y ago
  those numbers are normally for "worth of goods delayed" which, while interesting, doesn't tell the story to me Is it just me, but hasn't the mainstream financial news over the years taken on the feel of reality television? The talking heads are usually pushing some sort of narrative. Occasionally, reality overwhelms their ability to spin things, and they have to readjust and do damage control, as sometimes happens to the producers in a reality TV show. The aim of their manipulation and spin seems to be mainly to keep up the level of drama, just as in a reality TV show.
  • lisper 6y ago
    Drama sells better than facts.
    • sharken 6y ago
      I wish it wasn't so, but it is. Early on it was reported that it could take weeks to reopen the passage, with a cost of billions to the world trade. Now, just one week later it's open again, barely enough time to make the alternate route a good idea. These rather unrealistic projections seem to have started with the Coronavirus reporting and is an interesting phenomenon in itself.
      • arwineap 6y ago
        I don't think they had a previous sprint's velocity to base their estimates on; this was unprecedented. And honestly, had the ship still been stuck on wed, tide would not be as high for another moon cycle; further complicating.
      • goodcanadian 6y ago
        I am not sure the projections were unrealistic. The full picture simply wasn't known or even knowable. The best likely scenario with the known information was a few hours; the worst likely scenario was weeks.
      • Johnny555 6y ago
        it was reported that it could take weeks to reopen the passage That's true - it could have taken weeks and the cost of spoiled or delayed cargo could have reached billions. After a day of tugs unsuccessfully trying to free the ship, there was no reason to assume it would be a fast recovery. But the same news that said "it could take weeks" also reported on the ongoing efforts.
• viztor 6y ago
  I don't think there will be any spoilage, the goods travelled through sea are never fresh.
  • ericbarrett 6y ago
    .
    • gambiting 6y ago
      Ever Given is a container ship, containers don't carry live animals. Other ships that were stuck behind it have live animals(cattle mostly) but they are on ships specifically designed for animals.
    • ceejayoz 6y ago
      No. It was blocking ships with live animal cargo. https://www.theguardian.com/environment/2021/mar/26/at-least-20-livestock-ships-caught-in-suez-canal-logjam https://www.theguardian.com/environment/2021/mar/26/at-least...
    • deleted 6y ago
      [deleted]
  • spoonjim 6y ago
    LOL. The fruits in American grocery stores are not airlifted in from Brazil.
    • oasisbob 6y ago
      There are probably better ways to say this. If you're familiar with the industry, perhaps you could better inform the conversation. Personally, I've always been surprised by the amount of fruit, flowers, and other perishables that do economically come in via air.
      • spoonjim 6y ago
        Flowers, yes. Fruits, short of the exotic, name them.
• tyingq 6y ago
  Still not what you're asking for, but the analysis here looks like it's done by people who understand this sort of thing: https://lloydslist.maritimeintelligence.informa.com/LL1136229/Suez-Canal-remains-blocked-despite-efforts-to-refloat-grounded-Ever-Given https://lloydslist.maritimeintelligence.informa.com/LL113622...
  • ceejayoz 6y ago
    This seems to be the key bit: > If the canal does reopen quickly, vessels waiting now should be able to make up time without too much disruption to the supply chain, which is already weighed down by port congestion and inland transportation delays.
• ramblerman 6y ago
  What does such a number mean without context? Imagine a toy example: 2 bakers in a street. John and Jill. John has a heart attack and his bakery is closed for the week. - John gets nothing that week, from his perspective you could say he lost a week of sales - The people in the street lose Johns cakes that week, but most are ok with going to Jill, as they are close enough. 50% go to jill, and the other 50 decide to save the money. - Jill gains 50% of johns customers for the week. How would would you even assess the "global damage" in such an example for 1 street. Let alone the global economy. The money is there to drive things, pulling it out from one perspective is like looking at one weight in a neural network.
  • inetknght 6y ago
    Not only does Jill gain 50% of John's customers for the week, but let's say that 20% of those customers decide that they actually prefer Jill's goods and stay as customers of Jill even after John has re-opened.
    • pbhjpbhj 6y ago
      Yes, but some of Jill's customers come at lunch and couldn't afford to wait in the longer lines. Those customers now go to John's having waited a few days to look for an alternative. Jill gets 20% of John's clientele, but John gets more [impatient] customers than ever! There will probably be some additional flow of customers as people realise they're too lazy to walk to Jill's/John's, Jill's was only better when they were doing the extra trade (freshness), or that Jill's is back to being quicker service (and then you have a chaotic effect as more people drift back the wait time gets longer). The potential complexities of such simple systems are fascinating.
• skohan 6y ago
  I work on an IoT product, and operations is already talking about potential production delays because of this. There's already a global plastic shortage, and this is only going to make things worse.
  • hinkley 6y ago
    The silver lining there is that more companies should be able to absorb a double delivery when three weeks of goods all show up at once. Most businesses can’t just skip a week and then process twice as much raw goods to catch up.
  • oasisbob 6y ago
    > There's already a global plastic shortage Whoa, bad time to be in IoT then, since they're pretty much entirely plastic and a few (also probably short) components! https://www.recyclingtoday.com/article/plastic-scrap-demand-pricing-strong-march-buying-period/ https://www.recyclingtoday.com/article/plastic-scrap-demand-... https://www.icis.com/explore/resources/news/2021/03/10/10615779/insight-shortage-fuelled-switch-from-virgin-to-recycled-polyolefins-could-prove-permanent-for-some-grades https://www.icis.com/explore/resources/news/2021/03/10/10615...
• mrb 6y ago
  If we count only missed revenues for Egypt, this incident cost them about US$100 million. Canal revenues were US$27.2 billion in the last 5 years (https://www.reuters.com/article/egypt-economy-suezcanal/egypts-suez-canal-revenues-up-4-7-in-last-5-years-chairman-idUSL8N2F84GW https://www.reuters.com/article/egypt-economy-suezcanal/egyp...) which is US$15 million in revenues per day, and the canal was closed for 7 days.
  • Reason077 6y ago
    It’s probably less than that because many transits would have just been delayed, not entirely cancelled.
    • foobarbaz33 6y ago
      They run the canal at maximum capacity indefinitely. Due to the lack of downtime, any delays are in effect the same thing as a cancel from the perspective of the canal owners.
      • Reason077 6y ago
        According to reports, the backlog of traffic should be cleared in about 10 days. They must have some spare capacity available in order to do that.
        • matkoniecz 6y ago
          Maybe backlog will be cleared as result of some ships taking route around Africa?
        • foobarbaz33 6y ago
          The canal was blocked for only 6 days. Then 10 days to clear would suggest the opposite, that there is not spare capacity. All shippers have to eat a permanent delay that will never be caught backup, everyone is 10 days behind forever. And re-routes around Africa don't count as spare capacity for the canal itself. Of course there may be some *literal* spare capacity, that could be realized by violating processes. But the canal is in fact run at maximum capacity according to the maximum that official process allows.
• yrral 6y ago
  But isn't "worth of goods delayed" a reasonable figure? For example, if there is a total of X shipping capacity a year, and no reasonably priced alternatives (or extra capacity available via rail/air/etc), then disrupting $Y worth of goods for D days reduces the total amount of goods that can be traded that year by $Y*D. Or is there something I'm missing here?
  • s1artibartfast 6y ago
    The part you are missing is that shipping capacity/year is not hard capped.
• Shivetya 6y ago
  the livestock loss will be interesting to research as it was highlighted there was a significant number of ships carry live cargo. Odd, the Sun has a great article on this floating job https://www.thesun.co.uk/news/14484562/suez-canal-ship-refloated-freed/ https://www.thesun.co.uk/news/14484562/suez-canal-ship-reflo...
• omarhaneef 6y ago
  There is a term for the cost of just holding something you can't move: the carrying costs. Different commodities have different carrying costs, so you can look at the forward prices for wheat, oil, pork bellies and so on and get a sense for how much it costs to hold on to something for a week or a month etc. (On rare occasions the curve is inverted) It won't tell you how much it costs this tanker to delay delivery by a week but it will tell you on average how much "the market" values a week's delay. It is still a chore to go through and tally all the goods but I think a few main goods (oil, wheat, coffee etc) would account for a large chunk of it and if the carrying costs as a whole would give a sense of the order-of-magnitude of the economic loss. The loss itself may be distributed between various risk sharing parties like insurance companies and so forth.
• gnopgnip 6y ago
  Late delivery penalties aren't really an economic loss, it is a wash mostly. Similarly loss of revenue is mostly a wash The freight costs are in the range of 0.6%-3% of the cost of the goods transported on average. This is for the amortized cost of purchasing the ships, maintenance, the labor and fuel costs. If you estimate the value of the delayed goods at $10b, and the freight costs at an extra 2% that's $200m in damages. Most food transported this way wouldn't be spoiled by a delay of a week. If 10% of the goods were food by value, and 15% of them were perishable, and they were worth half as much after being delayed delayed a week that is another $75m lost to spoilage. But it isn't always a one week delay, many ships are delayed less to start, and there will be increased congestion in the ports and ground transport for many of these ships.
• TheSkyHasEyes 6y ago
  It's too soon to determine this right now.
• craftinator 6y ago
  According to this paper by the National Bureau of Economic Research, the average loss of value per day of delay from the cargo on these ships is between 0.6 and 2.2 percent [1]. According to other research I've seen, somewhere between 12% and 30% of daily global sea trade goes through the Suez Canal. Anyone want to do the math? 1) https://www.nber.org/digest/jun12/time-trade-barrier https://www.nber.org/digest/jun12/time-trade-barrier
• jldugger 6y ago
  Well, the Suez canal is optional, and comes at a cost just to use it. When the cost of fuel is low, you might opt for the long route. But there's definitely discontinuities that emerge when the option is taken away -- oil refineries lose supply, which increases the cost of fuel, which makes the long way more expensive.
• dkdk8283 6y ago
  The actual cost is $$ million in total, substantially less than a billion. Source: friend who is a merchant marine officer I expect commodity prices and spot shipping will jump short term but long term disaster avoided.