Automakers, suppliers brace for supply disruption from Suez Canal blockage

REUTERS

The Ever Given, one of the world’s largest containerships, is pictured after it ran aground in the Suez Canal.

Automakers and suppliers expect their supply chains to be impacted after a containership blocked the Suez Canal, halting the flow of goods through the key trade route.

The skyscraper-sized Ever Given has been stuck in the canal since Tuesday, suspending traffic of containers transporting goods, parts and equipment through the shortest sea link between Europe and Asia.

Audi said the blockage could affect deliveries of finished cars and supplies of materials that are already en route to their destinations. “The transport route takes several weeks, so the effects are not immediately noticeable,” Audi said in an emailed statement. “However, if the blockade continues for longer, that may change.”

BASF, which supplies coatings, plastics, and battery materials to the industry, said while the situation remains unclear, the company expects delays in shipping between Europe and Asia-Pacific. “The exact impact on BASF’s supply chains will depend on how long the disruption will last,” the supplier said in a statement. “At present, it is still too early to estimate this. We are currently monitoring and analyzing the situation thoroughly.”

Volkswagen said the shipping disruption has not impacted the company’s production sites so far. The situation “would certainly have to be reassessed” if maritime traffic in the canal became backed up over a longer period of time,” the automaker said.

BMW said the blockage is having no negative impact on the supply situation of its plants in the short term. “We are continuing to produce as planned,” it said.

The VDA German auto industry association said it was not currently possible to estimate exactly how the blockage will affect supplies needed for the country’s automotive plants. It said the alternative route around South Africa takes about 10 days longer.

Shipping companies were currently weighing whether to choose this “significantly longer route” or whether the Suez Canal could be fully usable again in the foreseeable future, a VDA spokesman said.

Moody’s Investors Service said about 30 percent of global container traffic flows through the canal annually. The severed trade route could affect about 10 to 15 percent of world container throughput while the blockage persists, it said.

Moody said Europe’s manufacturing industry including automakers and suppliers will be hit hardest, due in part to their “just in time” supply chain strategies that rely on precise, undisrupted delivery schedules.

“They do not stockpile parts and only have enough on hand for a short period, and source components from Asian manufacturers,” Moody’s analyst Daniel Harlid said. “Even if the situation is resolved quickly, port congestion and further delays to an already constrained supply chain are inevitable.”

It is unclear how long it will take to dislodge the Ever Given, which is one of the world’s largest container vessels. Some experts believe the canal could remain shut for weeks, blocking traffic in both directions.

Reuters contributed to this report.

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