Increasing Shipping Tolls to Inflate Medical Supply Costs in 2023
/Increasing transit tolls for passage through the Suez Canal may result in increased costs associated with healthcare, medical products, and various other consumer industries. The Suez Canal will increase its toll rates for ships using the maritime route connecting Europe to Asia. Expected increases will begin in January of 2023, raising vessel toll rates by 15% for freighters and 10% for dry cargo and cruise ships. Amidst the ongoing pandemic conditions still affecting many regions of the world, access to affordable healthcare and medical products will inevitably succumb to increases as almost 90% of global trade is facilitated through the vital canal.
The geographic significance of the Suez Canal places it centrally between Europe, Asia, and the Middle East. Before its development essential commodities, medicine, and health supplies had to make the arduous journey around Africa’s Cape Horn. Bypassing the southern route for the Suez Canal can reduce shipping time by more than seven days and save substantial money. The decision for the increased toll rates for this vital shipping route arose as higher than average rates of vessel traffic returned amid pandemic recovery, technological advancement in vessel utilization, and continued impacts facing congested shipping ports globally.
The Suez Canal is often described as the artery at the heart of global trade because a majority of trade is facilitated through the canal that connects the Mediterranean with the Red Sea. The canal observed more than 12% of all global trade and 30% of global container traffic each year. These large shipping containers utilize the much faster route to rapidly deliver critical commercial goods, energy, medicine, and industrial components.
As the coronavirus spread globally in early 2020, catastrophic maritime operation reductions in many ports forced freighters to opt for longer routes affecting their deliveries. The massive redirection of freighters during this time congested areas like the Suez, inadvertently forcing ships into smaller ports not designed to accommodate such a large influx of activity. The effects left medical professionals and the public without access to vital medications, tools, and equipment during a worldwide pandemic. The results of the congestion are still unraveling today, reinforced by the recent canal blockage by a cargo freighter in early 2021. The ship got stuck traversing the canal, blocking any passage by other vessels in the queue. Without an active channel to transport the ships, a gridlock of more than 100 vessels piled up on both sides of the canal, further contributing to the already delayed global trade industry.
After the 2021 blockage was cleared and signs of the pandemic began relaxing, maritime shipping rapidly increased past former heights as countries attempted to account for the economic losses of the last few years. This rapid traffic influx forced the canal to support the passage of more than 50 vessels per day. Additional advancements in vessel utilization has greatly improved larger freighter’s overall performance, extending their transport range and volume. The canal managers are worried that without adequate funding to support the growing daily use of the route, more accidents like the blockage of 2021 will occur and contribute to future stock shortages, delays, and restricted access to healthcare tools.
It is highly likely the health industries will face price inflation as the cost of consumer goods increase to match shipping costs. More than $1 trillion USD worth of global commerce industry goods pass through the canal each year. Potential welfare effects may impact less developed regions as healthcare costs also increase to afford inflated medical supply costs. Additional revenue generated by the 2023 toll increases is expected to reinforce the canal, prevent future blockages, and maintain increasing influxes of global traffic. Whatever changes American consumers face regarding the toll increases, the associated costs will still be more affordable than any commodity delivered via longer alternative shipping routes.