Why is the Suez Canal so important to global trade?

Alibaba.com APRIL 13, 20216 MIN READ
Why is the Suez Canal so important to global trade?

The blockage of the Suez Canal and its effect on trade

Recent events regarding the blockage of the Suez Canal have served as a reminder of exactly how important this waterway is to world trade.

The Suez Canal was blocked for six days after the accidental grounding of the 20,000 TEU container ship Ever Given. As the Suez Canal is one of the world's busiest trade routes, the blockage caused a substantial negative impact on trade between Asia, Europe, and the Middle East.

On the 28th of March, a minimum of 369 ships were waiting in line to pass through the canal holding up an estimated $9.6 billion worth of international trade and reinforcing the reputation of the canal as one of the world’s most important waterways. The accident created a shipping deadlock that will no doubt cost traders billions of dollars and delay many e-commerce items from China and other countries by weeks.

The Ever Given has now been corrected, but the financial impact could still be felt for months to come. David Jinks, Head of Consumer Research at ParcelHero commented “The closure of the canal has increased shipping costs, created knock-on delays at ports and the loss of many perishable items.” He continued “about 8.2 billion euros of goods have been held up every day. The delay will cost global trade over 5 billion euros. “It will particularly impact on e-commerce orders from Amazon and other e-commerce sites.”

Several of the ships that were blocked, including the Ever Given itself, were shipping e-commerce goods sold from online marketplaces such as Amazon, eBay, and AliExpress. The British shipping company Seaport Freight Services has 20 containers of goods stuck on ships, including many e-commerce orders. Likewise, Seabay International Freight Forwarding also has between 20 and 30 containers on ships waiting to transit the canal.

The history of the Suez Canal

The Suez Canal officially opened on 17th November 1869 although previous local artificial waterways had dated back to the Ancient Egyptian period. Interest in a waterway connecting the Mediterranean Sea and the Red Sea dates back to ancient times and a sequence of small canals linking the River Nile (and the Mediterranean) to the Red Sea was being utilized as far back as 2000 B.C.

Nevertheless, at the time, a straight connection between the Mediterranean and the Red Seas was considered implausible over concerns that these bodies of water sat at different levels of altitude. Consequently, several overland routes (utilizing horse-drawn carriages and, later, trains?) were employed, most notably by the government and industry of the United Kingdom, which conducted substantial trade with its colonies on the Indian subcontinent. The building of the waterway began (at the northernmost Port Said end of the canal) in 1859. The excavation work took over 10 years, and an estimated 1.5 million people worked on the scheme.

The Khedive of Egypt and Sudan, Ismail Pasha, formally opened the Suez Canal on November 17th, 1869. Formally, the first ship to sail through the canal was the imperial yacht of the French Empress Eugenie L’Aigle, followed by the British ocean liner Delta.

Today the canal provides vessels with a direct route between the North Atlantic and northern Indian oceans via the Mediterranean and Red Seas. The waterway reduced the journey distance from the Arabian Sea to Western Europe by around 8,900 kilometers (5,500 mi). The Suez Canal itself (with a length of 193.30 km (120.11 mi) ranges from the northern terminus of Port Said to the southern terminus of Port Tewfik at the city of Suez. In 2020, more than 18,500 ships navigated the canal, an average of 51.5 per day.

Shipping and logistics advice

After the first few months of 2021, many international shippers have found themselves dealing with difficulties similar to those that they faced in 2020, especially with regard to the effects of the global pandemic. The best ways to deal with shipment/transportation issues in global B2B trade today need to be researched before commitments are made as, these days, logistics solutions need to be personalized to each customer depending on which geographical regions and types of bureaucracy are involved. Shipment costs are always a key issue and it is always best to employ a shipping company that has experience in your type of trade.

There are several different ways to ship your products including-

  • FOB - The price invoiced or quoted by the seller includes all charges up to placing the goods on board a ship at the port of departure specified by the buyer.
  • FAS - The price invoiced or quoted by the seller includes all charges only up to the ship at the port of departure (but doesn’t include loading the goods onboard).
  • Ex Works - The price invoiced or quoted by the seller includes all applicable charges from them right to your door.
  • C&F - The price invoiced or quoted by the seller doesn’t include insurance charges, but includes all expenses up to a named port of destination.

Alibaba.com has published a detailed report on each shipping method and it’s a good idea to check this out to see what form of shipping and freight best suits your business. It is also important to check that the quote that you receive from your freight service includes everything that you need to ship your product including port clearance, insurance, and taxes at destination ports.

How Alibaba.com supplies solutions to trade problems

Alibaba.com provides solutions for all B2B trade including advice on how best to conduct your shipping and also the cheapest way to operate as minimizing your transport costs will increase your profit. After Alibaba.com has provided its primary function, which is to put you together with suitable buyers, the platform will continue to advise you on the best ways to communicate, advertise and expand into new global regions in order to truly optimize your business and its strengths by providing the perfect marketplace for your products.

Today, more and more businesses are trusting Alibaba.com with their B2B trade as many take advantage of the many services and suites of tools designed to help and encourage businesses to expand easily onto global markets.

Alibaba.com has been operating for more than 20 years and in that time has grown to be one of the biggest e-commerce platforms on the planet. Alibaba’s reputation has also grown during that time and the e-commerce platform is widely considered to be the most effective and most trustworthy service of its type in the world.

A cursory visit to the Alibaba.com website can provide you with enough advice to help you decide which direction you want to take your business in. The site will provide you with everything from a business encyclopedia to many references left by satisfied sellers from around the world. This advice is being constantly updated in the face of changing global circumstances such as the COVID 19 pandemic and the Suez Canal blockage.