Evergrande, Ever Given, & beyond

Six months on from the grounding of a super-sized container ship, the financial stresses of China’s largest property developer cause another global risk event. And more shocks are likely.

In March, the Ever Given, one of the world’s largest container ships, grounded itself in the Suez Canal.  In the six days that it was wedged in the Canal, it held up over 350 ships and led to widespread delays as global shipping was backlogged.  At the time, I noted that the search for efficiency had led to an exposure to diseconomies of scale.

As it turned out, this was only the start of a much wider set of disruptions.  The rapid global economic rebound, combined with constraints on the global shipping network, has created pressures across the system – with multi-month delays in shipping goods across the world as well as substantial increases in shipping costs.

From stuck ships to debt defaults

In a linguistic quirk, attention has shifted from the global economic impact of the Ever Given to Evergrande, China’s largest property developer.  Indeed, Evergrande is likely to be a much more significant global economic event over time.

Evergrande has debts of over $300 billion, which it is now…