How The Suez Crisis Might Give Rise To A New Industry

early last tuesday the ever given one of the largest companionships in the world ran aground at the southern tip of the suez canal blocking one of the main arteries of global trade as we have already explored on this channel this incident could not have come at a worse time global shipping and by extension global trade has already been hit hard by the fallout of the coronavirus shipping companies have been forced into scrapping perfectly good ships because they are simply too expensive to keep afloat dormantly sitting off a coast somewhere experts have estimated that what might look like a minor inconvenience will likely end up costing over 400 million dollars an hour for every hour that this global thoroughfare was blocked off and while of course the ever given is now free this issue is far from resolved shipping companies are banking on weeks worth of direct knock-on delays and in the long term the fragile system that is global shipping may never truly recover from this hammer blow but in crisis comes opportunity and this particular disaster has many experts excited about what this all might mean for the introduction of modern airships yeah that's right airships but we'll get to that later on because to really be able to assess the viability of these modern hindenburgs we must first understand some important details about the world's worst parking job so how is this going to impact the already struggling shipping industry who is actually going to end up paying the 400 million dollars an hour that this debacle was reported to cost and then of course how is this all supposed to accelerate the roll out of modern airships this video is brought to you by trends the internet's premier knowledge hub trusted by over 16 000 hustling entrepreneurs angel investors and aspiring visionaries alike thanks to their platform you'll gain private access to information that was previously reserved for the one percent of the one percent like hedge fund wizards and the largest venture capital firms which employ armies of analysts all searching for the next big thing like ride hailing but come on like anyone would get into a car with a stranger right or cryptocurrency another crazy idea do you really expect someone to fork over real dollars for bits of an online coin or a bitcoin as it's apparently called whatever that is if you guys are tired about only learning of world-changing technologies in the wall street journal after the fact and you instead want to be part of these trends long before they become mainstream news then stop what you're doing now pause the video and try out trends today see what the hype is all about by signing up for a one week trial all for just one dollar by going to trends dot co slash ee again that's trends dot co slash ee the link is on the screen now and in the video description below the suez canal links the mediterranean with the red sea which in turn leads out to the indian ocean and the economies of asia this makes the 200 kilometer long man-made waterway the most direct shipping link between europe and asia which outside of north america are the most active regions for global trade in the world 12 of all global trade not just shipping trade but all global trade is dependent on this canal which causes a problem that most stakeholders have tried to ignore the world economy is heavily dependent on an extremely exposed piece of infrastructure i don't just mean exposed to drunken sailors either but rather exposed to other potentially more severe circumstances as well anybody who has watched this channel for any amount of time will know that economies depend on stability and confidence above all else if participants in an economy are not guaranteed some level of stability in their day-to-day lives and if they don't have confidence in the systems that make up that economy well then you don't really have an economy at all at best you have anarchy well trade is much the same nations agreeing to trade with one another involves well a trade-off of sorts by agreeing to international trade nations lose a bit of self-sufficiency in exchange for more prosperity now normally this is fine international supply chains and global cooperation has made the world a far wealthier place than it ever could have been if nations just kept to themselves but if the nations involved in this trade don't have confidence in its stable operations they are going to revert back to self-sufficiency very quickly for example there are major economies like japan russia the uae and even the uk that are net importers of food this means that they are ultimately reliant on global trade to feed their populations now for the most part this is fine instead of focusing on farming they will instead produce high value manufactured goods or raw materials and export them in exchange for food from nations where farming is more efficient but if those same nations could not be 100 guaranteed of the ongoing stability of this food supply you better believe that they are going to restructure into making sure that they are able to feed their people first and worry about making that new playstation second this leaves everybody worse off overall but this reduced living standard is a small price to pay to make sure that people get fed now as we have seen at least 12 of this perceived confidence will come from this waterway here which is not great considering that well of course someone might have an oopsy but perhaps more importantly the region that it's in is not exactly confidence inspiring in the 152 years since the canal was first opened it has been the center of three wars and has been seriously claimed by at least four separate governments even beyond that it isn't even the first time that this canal has been blocked remember this canal was first built in a time where ships looked like this as modern container ships have grown larger and larger there have actually been three blockages similar to what we've seen here with the evergiven in the past 20 years of course up until now it might just sound like an uncomfortable reality that trading nations have to deal with given that there really isn't a much better alternative but given the difficulties caused by the fallout of coronavirus compounded on top of this new very public display of how vulnerable shipping routes can be it probably comes as no surprise that there are increased cause for politicians to support local industries over international trade now this might sound like the classic battle of globalization versus national self-sufficiency and it sort of is but the difference here is that normally people will have opinions but still overwhelmingly end up voting with their wallets for the cheapest goods which are surprise surprise produced using global supply chains but if it really does become a debate over dollars and cents which it will then it's important to understand who it is that is going to pay for this mess people following this event will likely have heard that this mishap ended up costing the global economy somewhere in the region of 10 billion dollars per day but where did this figure actually come from and who is going to pay it well there's actually a good chance that this figure is heavily exaggerated and we can see this by doing some pretty simple maths in 2019 the total value of goods traded throughout the world was 19 and a half trillion us dollars now of course giving covert restrictions this figure will be a lot lower in 2020 and 2021 but for the sake of argument let's just take this generous figure of and a 19.5 trillion if we divide that to give us a daily figure this works out to be just over 50 billion dollars per day now as we've seen the suez canal facilitates 12 percent of this global trade which would give us a figure of six billion dollars falling almost 50 percent short of these estimates but here's the thing even if we just accept all of these very generous assumptions this money isn't lost per se most of the goods sitting on these ships will be just fine when they eventually get to their destination they'll just be a bit delayed now that's not to say that this figure is totally bogus more that it's widely misinterpreted this will be the sum total of trade not realised because of this incident you see even now that the ever given is free it does not mean that the traffic jam is cleared the suez canal can only handle so much traffic and it will be dealing with this backlog of ships for at least the next month once this is considered and the actual cost of the operation to free the vessels are taken into account then in a stretch economists can claim this ended up denying this massive figure think of it like this if your car breaks down on the way to work and you get fired for not showing up on time there are two things to consider one you have to pay out of pocket to fix your car that might be a few hundred bucks not great but whatever but the bigger figure is going to be that you will miss out on thousands of dollars in income that you are not receiving because you no longer have a job nobody is writing a check for billions of dollars to make the global economy square and even the few million dollars at costs and salvage operations to get the ship free will just be paid by the ship's insurance the easiest way to tell that this massive multi-billion dollar figure will not be a true cost is to look at the market value of the shipping companies that have been delayed msc mask and yes of course even evergreen are actually up from where they were when this ship got stuck maybe there really is no such thing as bad publicity now despite this not being a massive financial burden on any one institution in particular there is no denying that this is still a massive disruption and as a fun little thought experiment a few global experts have been toying with the idea that this issue could once again give rise to a new age of modern airships that's right these things these things right here now you're probably gonna say that that is really silly what with their less than stellar track record but recent developments have shown that these aircraft could have a few very tangible use cases almost all global trade in the world today gets done in one of these an industry standard 40 foot shipping container there are basically four main ways that these containers can be moved around right now by ship obviously by train by truck and by plane all of these have distinct advantages and disadvantages the big reason shipping is so popular is because it is cheap we saw in our last video that sending a container from england to australia was cheaper than sending it a tiny fraction of the distance to switzerland because it could be sent the entire way on a ship which is way cheaper per mile than a truck but therein lies the first disadvantage ships can't service inland regions meaning that landlocked nations and non-coastal cities need to look for alternatives trains are the next best bet their steel and steel locomotion means that they can transport goods very efficiently as well but in the same way that ships can't access areas without water trains can't access areas without tracks and tracks are far less common than roads that are utilized by the next best option which is trucks now trucks actually kind of suck as an efficient way to transport stuff the constant requirement to stop and start means that they are very inefficient and even the largest trucks can only haul three of these containers at a time and even that's well above normal when you compare the average of one container per truck driver to let's say the ever given which has twenty 000 containers for its crew of 25 it's obvious that simply based on personnel costs the economics favor the larger vehicles now of course there is a more expensive option and that is flying but most planes don't carry these kinds of containers at all and the only advantage they have over any other alternative is that they are fast which makes them great for small high-value items but pretty much useless for anything else now the common weakness amongst all of these transport mediums has been their dependence on infrastructure their job is to get a good from point a to point b but more often than not these two points are not an airport or a shipping terminal or even a train station which means the last few miles are almost always done using a truck this dependence on infrastructure means that these alternatives are also susceptible to rail track maintenance or airport closures or you know beachy mcbeached face here what supply chain managers really need is a way to round out these options with something that can go directly point to point doesn't depend on runways or railways or waterways is cheaper than flying but faster than shipping and can quickly fill in for any of these alternatives when things don't go quite right this is where some experts are arguing airships could come in modern airship prototypes have shown promising been able to carry very heavy loads very efficiently while also being able to deliver those loads point-to-point without the need to pass anything off to trucks for final delivery this actually opens up some applications that were even infrastructure limited by roads like supplying remote mining operations disaster relief in areas that have had transport infrastructure ruined or maybe even collecting containers of a ship that's found itself stuck now the people that think of airships as the goodyear blimp at best and all the humanity at worst this might sound a bit far-fetched but governments and companies around the world have invested hundreds of millions of dollars into exploring this concept and capitalizing on potential applications now maybe this will all go down and smoke like the last attempted air shipping did or maybe it might be the next best thing at least now you know to look out for it and you can continue to keep your eye 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Channel: Economics Explained

Views: 497,718

Rating: 4.7376356 out of 5

Keywords: suez canal, suez canal blocked, suez canal explained, suez canal boat, suez canal ship, evergreen, ever green, evergiven, ever given, suez canal trade, boat blocking the suez canal, ship blocks suez canal, suez canal freed, how was the suez canal ship freed, suez canal blockage, economics, economics explained

Id: olhL0X2oQTM

Length: 14min 20sec (860 seconds)

Published: Thu Apr 01 2021

Reddit Comments

[u/barley2tormer]

Great video thanks for sharing. When the ship got stuck I turned to my gf and said “this could be a huge opportunity for airships” but couldn’t find anything on the topic!

Let’s hope LTA gets their “Pathfinder 1” in the air soon!