The blocking of the Suez Canal by the cargo ship Ever Given shows the threat climate change poses to the global economy, according to a new report from the world’s largest insurance broker Marsh.
Rising sea levels and an uptick in extreme weather events could wreak havoc on global supply chains by disrupting key shipping routes such as the Suez Canal, the New York insurer said.
Threats to the world’s five key shipping routes – which include the Malacca Straits between Malaysia and Indonesia, the Straits of Hormuz between the UAE and Iran, the Bab-al-Mandab between Djibouti and Yemen, and the Suez and Panama Canals – could have an outsized impact on the global economy in disrupting “critical points of failure,” Marsh said.
It noted the Suez Canal plays a role in an estimated 12 per cent of global trade, in helping transport around one million barrels of oil a day and eight per cent of the world’s supply of liquified natural gas (LNG). The Ever Given event alone is estimated to have cost $9.6bn a day in holding up hundreds of container ships over a six-day period.
The insurer warned that climate change driven disruption now threatens to undermine the very basis on which previously successful “just in time” supply chains have been built, as it called for new measures to boost the resilience of the five key waterways that play an outsized role in global trade.
Marsh warned disruptive weather events, driven by climate change, could increase the frequency of Ever Given like events, as it noted rising sea levels could also have a major impact on the integrity of port infrastructure.
It also warned that any decline in the Suez Canal could also have a major impact on the Egyptian economy, in noting the artificial waterway accounts for 60 per cent of Egypt’s foreign trade and three per cent of the country’s GDP.