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The cost of one stuck ship in the Suez Canal – rising costs of fuel, household goods, food

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The cost of one stuck ship in the Suez Canal – rising costs of fuel, household goods, food | Thaiger
PHOTO: The Standard

That container ship is still stuck in the Suez Canal. It’s created a huge traffic jam at either end – some 240 ships. Even if they clear the blockage (get the ship out of the way to let other ships pass) soon, it’s predicted to take most of April to clear the backlog. The cost to world shipping has been estimated at 9-10 billion US$ each and every day.

The Ever Given is 400 metres long, about as long as the Empire State Building is high, and weighs 200,000 tonnes. The ship ran aground, stuck sideways in the Canal, last Tuesday with high winds and a sandstorm affecting navigation.

Not going to affect you? Think again.

The Ever Given has become Very Stuck and is delaying the shipment of goods from Asia to Europe and North America, and back the other way, through the world’s busiest shipping channel, handling some 12% of the world’s shipping traffic. Despite the ship’s rudder and propellor being cleared, the ship is still firmly wedged in place.

Apart from a whole variety of household goods waiting to get through, there’s also oil tankers and livestock waiting patiently for the vital sea-route to be unblocked. Crude oil markets have already added 3% increase to the price per barrel in reaction to Ever Given’s not-going-anywhere-fast situation.

Pre-Ever Given, there was already a shortage of ships and containers as the world, unable to physically fly from here to there, have been spending their disposable income on online shopping, stretching global supply chains to the limit. Whilst passenger planes were quite easily converted to cargo planes, taking up some of the cargo slack, the world’s shipping fleet was already hard at work. Spare containers were few, ports were congested. In some of the world’s busiest ports – from Shanghai to LA, Singapore to Busan, Bremen to Laem Chabang – ships have been at anchor, for longer, waiting to be unloaded in recent months (7 out of the top 10 world’s busiest container ports in the world are all in China).

Even if there is a sudden move to air freight or alternative routes, the impact of either solution will quickly add to the costs of transporting goods globally.

Although manufacturing was hard hit in the early days of the pandemic, the pickup later in 2020, both in manufacturing and our demand for goods (furniture, TVs, inflatable pools, exercise machines, electronic and gaming gadgets, and clothing) has stretched the supply chain and contorted it as companies re-aligned those chains and sought new markets (remember the US-China trade spat was all happening at the same time last year).

This unexpected consumer demand has shot up the cost of moving the standard 40 foot container. The average cost to ship just one container has gone up from US$1,040 in June, 2020 to $4,570 at the start of March, 2021, according to S&P Global Platts. Guess who will eventually pay for the additional costs of shipping? And the current blockage will only exacerbate the problem, making shipped goods more expensive, faster.

The current, and unscheduled, closure of the the Suez Canal will cause shortages of products, from agricultural products, livestock to computer parts, car parts, wines and all smartphones coming out of Asia. The list of affected goods is long.

The obvious solution (try another route) will just delay shipping longer and further delay the arrival of ships and containers. The longer routes also add additional cost. The return journeys will also be delayed, etc, etc. About 80% of the world’s total trade, by volume, travels by sea.

There are also some key indicators which could be hugely affected by this one ship blocking the Suez Canal. The ‘Fed’ (the US Federal Bank Board) has been fearful of inflation kicking in which could trigger a number of financial pillars – one being a shock to the US stock market. Rising costs will put additional pressure on inflation and leave the Fed less room to move to counteract any major reversal in the US share market.

So the entire world can expect both rising prices for many goods and delays in anything that’s coming from overseas by ship. That this situation may happen sooner rather than later will be the fault of on stuck container ship.

SOURCES: Sky News | CNN | New York Times | Wikipedia

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7 Comments

7 Comments

  1. Avatar

    toby andrews

    Sunday, March 28, 2021 at 11:32 am

    If they unload containers off the ship both sides of the canal, the ship will float free.

  2. Avatar

    EdwardV

    Sunday, March 28, 2021 at 11:56 am

    Not that this event is a good thing, but it doesn’t really hurt the US as much as some think. Most US goods don’t traverse the Suez canal. The US doesn’t even really import oil anymore. Also the Fed would love some inflation, it would allow them to raise interest rates. The Fed target for inflation is 2%, and right now it’s about zero. They want to raise rates so they have ammunition to fight the next inevitable recession. Because the US prime rate is also pretty close to zero, their ammo bag is empty. The US only gets about 15% of their GDP from imports/exports, one of the lowest rates in the world. Last many of those US stretched supply chains have started to move back home (or at least to Mexico and Canada) over the last decade. The China flare up only accelerated it.

  3. Avatar

    Issan John

    Sunday, March 28, 2021 at 1:54 pm

    “If they unload containers off the ship both sides of the canal, the ship will float free.”

    😂 😂 😂 😂 😂

    Maybe Harry Potter could help!

  4. Avatar

    toby andrews

    Sunday, March 28, 2021 at 3:13 pm

    Yew well there are plenty of people that scoff who do not offer any suggestions themselves.
    Have you any ideas I John?
    Scoff at this one.
    Anchor several heavy ships close together downstream. This will have the effect of damming the canal and floating the stranded vessel.
    Or, just dam the canal downstream, which will have the same affect.
    Your idea John?

  5. Avatar

    Mr cynic

    Sunday, March 28, 2021 at 8:07 pm

    Last i heard about this is they are removing ballast from the ship and they are investigating lifting containers off.problem is they require a very big crane to lift them off and no cranes of sufficient height and lifting capacity are available in the local area at this time.the costs and insurance claims in relation to this operation will be huge.

  6. Avatar

    toby andrews

    Sunday, March 28, 2021 at 11:07 pm

    There I John, read Mr cynic.
    They could also offload the fuel to make the ship lighter . . .
    The cranes will be there eventually.

  7. Avatar

    Dreqo

    Monday, March 29, 2021 at 10:34 am

    What a strange coincidence.

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Economy

2 emergency decrees provide businesses financial help

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2 emergency decrees provide businesses financial help | Thaiger
PHOTO: 2 Decrees aim for financial relief for struggling businesses

Thailand enacted 2 new emergency decrees today aimed at providing assistance to businesses and reducing default interest rates to help people affected by Covid-19. A deputy government spokeswoman confirmed the needed action was critical to protect and aid entrepreneurs and small and medium-sized enterprises during the time of pandemic-driven economic crisis.

The goal was to combat unfair interest rates on debt many are suffering, and to provide loans to help keep businesses afloat as the end of the Coronavirus is nowhere in sight.

The Emergency Decree on the Provision of Financial Assistance for Entrepreneurs Affected By the Covid-19 Pandemic allocates 250 billion baht in loans for businesses to recover from the devastating economic effects of the global pandemic. 100 billion baht of this is specifically set aside for those businesses in debt to participate in asset warehousing or debt repurchasing plans.

Asset warehousing allows businesses, like hotels, to essentially store their property in the care of a creditor for a fee until the economy recovers enough to take over the property again and start making money with it again. Debt repurchasing is a process for a business to buy back its own debt with better terms or a lower rate with the purchase price considered a payment to the principal debt not the interest, similar to refinancing a home.

The second of the emergency decrees, an amendment to the Civil and Commercial Code, looks to close loopholes caused by ambiguity in the law that allowed predatory creditors to charge unreasonable interest rates.

If someone missed a loan payment, the original law did not set a default rate, so lenders could charge additional interest. Debtors can now base default rate calculations on the unpaid principal in the updated law. The new decree sets a 3% yearly interest rate and lowers the default rate to 5% a year from the originally 7.5%. The Finance Ministry declared interest rates would be revised every 3 years.

SOURCE: Bangkok Post

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Pattaya

Unemployed elephants walk 500 kilometres from Pattaya to Surin

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Unemployed elephants walk 500 kilometres from Pattaya to Surin | Thaiger
PHOTO: Elephants walking down the road because their car is in the shop.

A group of 5 elephants and their owners began the long walk today from Pattaya to Surin after giving up on the return of tourism anytime soon. The 500 kilometre journey has to be done on foot as they couldn’t afford to hire trucks large enough to carry each elephant.

After waiting a year for the Chinese tourists that make up a majority of their customer base to return, the families decided to embark on the long journey with the 5 elephants to their home in the northeastern province of Surin. As they walk they’re protected on both sides by pickup trucks to keep them safe from cars.

5 years ago Napalai Mai-ngam came with her relatives to work in an elephant resort in Tambon Lam Huay Yai of Bang Lamung near Pattaya with their 5 elephants. They told the Bangkok Post that their earned a good living, about 75,000 baht (15,000 per elephant) plus tips from the tourists to ride elephants on nature trails, each month.

But with the borders closed due to the Covid-19 pandemic the tourists from China who usually flocked to elephant activities, were stuck back in China and Napalai’s boss had to cut their pay. Even with vaccinations finally underway, tourists in numbers, enough to sustain activities like elephant camps, may not be back anytime soon. The families finally had to surrender to the reality and start the long walk home.

They avoid the blistering Thai sun by walking early mornings while the weather was still cool, and hope the roadways out of Pattaya would provide snacking opportunities for the elephants to graze. They expect the journey to take about 2 weeks. The families have turned down offers of cash donations for fear that their long walk will be viewed as a publicity stunt.

That said, the families have expressed gratitude to the locals in towns they pass who have donated drinking water, food and fruit to the entourage of people and elephants. If you would like to donate resources you can contact them on phone number 093 335 7062.

SOURCE: Bangkok Post

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Economy

Southern Thai people turn from tourism to gold panning

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Southern Thai people turn from tourism to gold panning | Thaiger
PHOTO: Traditional panning for gold replaces tourism for income in Southern Thailand

Thars gold in dem hills!

With tourism in Thailand struggling due to Covid-19, and an economy needing some help, some people in the southern Thai region of the country have found income in an unusual source: panning for gold. The Sukhirin region close to the Malaysian border is known for gold deposits in the Sai Buri River and surrounding mountains. Villagers who made money before with tourism have now returned to panning for gold using old-fashioned manual techniques their ancestors used, without the aid of any machinery. Well, just an old pan.

Locals had previously made money selling food to passing tourists or acting as a tour guide to take people around the area, where travellers seeking to get away from the crowded and overdeveloped tourist areas that attract the most foreigners find many unique activities. Kayaking was a popular local activity with up to 150 people a day sailing down the rivers that are now filled with locals panning for gold. The prospectors are now making their income from the gold they collect which sells for 1,500 baht per gram. Families that work together can often collect at least one gram a day.

Thai Gold prices have reached record highs over the last 2 years and many Thai people have traditionally used gold and gold jewellery as a form of savings and investment, pawning their gold rings and bracelets in times of financial emergencies. The gold collected from these Southern villages will be used to make jewellery in Bangkok.

The region had invested in expanding into ecotourism but the pandemic put all their construction plans on hold. A cable car was being built to transport people up to the tops of the mountains to beautiful temples. The area’s unique history attracted people to their annual Rocket Festival, typically a north-eastern celebration.

In 1932, France was granted a 25 year mining contract in the jungles. They extracted almost 2000 kg of gold before World War II forced closure. The mining tunnels still exist and sometimes attracted adventurous tourists, but now sit vacant aside from snakes. In the 1960s the Thai government incentivised northerners with 18 rai of land each to move to the region. As a result, the area stands out in the Muslim region with 90% of the population being Buddhist, and most still speaking Isan dialects.

SOURCE: France 24

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