For Cargill's shipping unit, Suez block ended up as a minor challenge

A week after tugs and dredging crews freed the Ever Given container ship from blocking the Suez Canal, things are getting back to normal for the ocean transportation unit of Cargill Inc., a leading shipper of food and ingredients.

The ordeal brought global attention to an industry that consumers rely on; more than 80% of global trade by volume occurs by ship.

Minnetonka-based Cargill had 13 vessels caught in the backlog around the Suez Canal when the Ever Given, one of the world's largest container ships, became wedged in a narrow passage on March 23.

Cargill charters ships — usually bulk carriers, or "dry goods" vessels — and it had fertilizers, iron ore, coal, grain, steel and vegetable oil in passage around the canal at the time. As soon as the Ever Given grounded, employees at Cargill's ocean transportation unit, based in Geneva, went on high alert.

"When we first started picking up that there was an issue, what we straightaway did was we started monitoring all of the vessel activity through the Suez so we could really get a handle on what was happening," said Jan Dieleman, president of Cargill ocean transportation. "We saw the queue building quite a bit, and then the news came out and, of course, everybody then started looking at it."

Cargill immediately started warning its customers that their shipments might be delayed. If the blockage extended two or three weeks, it could also mean Cargill would be unable to meet pickup orders further out on its schedule.

The company's ocean transportation unit, which employs about 300 people, began calling ship owners to see what vessels might be available for charter should the grounding of the Ever Given become a protracted affair.

For six days, global media reported on the impending economic ripple effect should the Ever Given remain lodged beyond a week, ranging from a spike in oil prices to a more expensive pair of sneakers. The Suez blockage, coupled with the pandemic, reminded the world of the shortcomings of just-in-time manufacturing, a model that nearly every industry — from retail to pharmaceuticals — now employs. Industries that leverage the just-in-time approach avoid building up warehouse inventories as a way to cut costs and boost profits.

"If you run tight supply chains and you run them efficiently, it makes it cheaper for your customers, and price still is a very important variable in the whole equation, and efficiencies accomplish that. By definition, you are going to get this just-in-time approach," Dieleman said. "On the other hand, you want to make sure it doesn't go overboard. What we are always trying to do is find the balance."

The 120-mile canal, built in the 1860s, shortened the passage between Europe and Asia by making it possible for ships to pass through the northeast corner of Africa rather than going around the continent.

There are primarily three types of merchant ships that pass through the Suez: container, oil and dry goods. Containers, carrying everything from toys to electronics to medical supplies, are by far the most prolific in the Suez Canal, and also run on the tightest schedules.

Freight and oil prices temporarily rose in anticipation of a prolonged blockag.

In the end, Dieleman said, the nearly weeklong closing of the canal was never a dire situation for Cargill. Its supply chains have a bit more slack than users of container ships, and disruptions are something Cargill is used to navigating.

"The biggest disruption has been in the container segment," he said. "I think it's a good reminder for people that probably some of them have run a little too tight on supply chains."

Container shipping represents the vast majority of all commercial ocean transportation, said Alan Murphy, chief executive of Sea-Intelligence, a maritime data and analytics firm. Once the Ever Given was freed, vessels started pouring through the canal. "They were squirting out like a ketchup bottle," Murphy said.

Typically between 40 to 50 merchant ships pass daily through the Suez Canal. In the days following, about 75 were clearing every day.

The next congestion point will be at ports, Murphy said, which many already had long wait times due to high pandemic-related demand for consumer goods. The port traffic should normalize in three to four weeks.

Global shipping has been under heightened pressure during the COVID-19 crisis as consumers, particularly in North America, order office and computer equipment to work remotely, building and gardening supplies for small-scale projects and toys to entertain kids stuck at home.

This led to greater demand on container shipping than there was supply, an imbalance that should reset once life returns to a new sense of normalcy, Murphy said.

Dieleman said another pandemic-related problem in the shipping industry has bothered him for more than a year.

"This has so much attention, but what I've found a bit frustrating is that we've had a tremendous crewing crisis in the past year, with people stuck on ships for months and months, not being able to get off ships, not being able to go home and that got very little headlines compared to this incident," Dieleman said.

Kristen Leigh Painter • 612-673-4767