Dividends and Suez Canal traffic jams imperils global shipping

For generations goods have gone from Asia up the Red Sea and then transported by caravans to Cario and then to ship to Europe. For a long time the destination in Europe was Venice, but the distribution point has changed over the years. In 1869, the Suez Canal was open for boat traffic because carrying bulk goods on boat is less expensive than on land.

In the last 20 years, the ability to hold larger ships has made the world’s just in time delivery system dependent on the Suez Canal. Most of us do not pay attention, until something happens and in the last week of March, the world pay attention to a large ship blocking the canal. No one knows exactly why the ship went off course, there was a blame on winds, but 50 miles a hour winds are not uncommon.

In an article by Jon Gambrell and Samy Magdy of the Associated Press, The Japanese owner of a skyscraper sized ship carrying hundreds of containers ran aground and was stuck, The ship is so large it can only be loaded and unload at 5 ports in the world because of the need for specialized cranes. Thus the solution led by a Dutch company called Boskalis, was to dredge or dig around the ship and then have tug boats push and pull the boat to the middle of the canal.

The ship’s crew is from India, the ship is registered in Panama, the operator is from Taiwan and the owner is Japanese, welcome to the world on shipping. All ships are tracked by GPS and data firm Refinitiv shared an analysis more than 300 ships remained on the way as opposed to going around Africa to get to or come from Europe. Many of those ships are carrying oil and gas from Europe to China.

The reason why the delay is important is cargo will be delayed over the new few weeks, if you think about shopping seasons, they would be carrying the summer clothes. Stores need the supplies at the start of summer, not in the middle of the season.

The shipping journal Lloyd’s List estimates every day the Suez Canal is closed it disrupts $9 billion worth of goods that should be passing through the waterway. A quarter of the ships are container ships, the others carry bulk commodities.

Linking to dividend paying stocks, all companies embrace just in time shipping for very good reasons, keeps cost of inventory down and profits higher. The system works till it does not, but the alternative to stock greater inventory is more expensive. The blockage of the Suez Canal, puts what systems do the companies you invest in use for just in time deliveries?

There are more questions than answers, till the next time – to raising questions.

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