Logistics News

All you need to know on the vessel blockage in the Suez Canal and its impact on global trade

For nearly one week, the Ever Given vessel was blocking the Suez Canal and, with that, any traffic going through the passage. Now, the vessel has been re-floated. However, the event puts pressure on global supply chains and trade. Here we explain what you should know to keep your cargo moving over the following weeks.

06 April 2021

Since our latest update, a lot has happened around the situation in the Suez Canal. That's why it's time for an update about the situation and giving insights into global trade as well as how we keep you informed throughout this time:

What has happened in the Suez Canal?

The container ship Ever Given was en route from Yantian, China, to the Port of Rotterdam in The Netherlands when it was knocked off course by strong winds and a sandstorm on Tuesday, March 23rd.

Immediately after Ever Given ran aground, the Suez Canal Authorities began their efforts to re-float the large container vessel. Among them also two tug boats from Svitzer, A Maersk strategic brand and part of the Maersk Group. Finally, on Monday, March 29th, the efforts were successful.

Why is the Suez Canal so crucial for international trade?

With about 12% of global trade passing through the Suez Canal per year, the trade route connects the Mediterranean to the Red Sea and provides the shortest sea link between Asia and Europe. The Suez Canal has a daily capacity of approximately 50 – 85 vessels entering from both sides. 

Why is the situation impacting international trade?

The incident created long tailbacks on the waterway, stopping vessels from passing and causing delays. Nearly 400 vessels got stuck in the canal, and that has real implications on global trade. Vessels are now crossing the canal again. However, disruption to global trade continues with multiple vessels crossing the passage days later than planned. That slows the arrival of containers at their destinations and delays when they can be emptied and then refilled with other goods towards their next destination.

Moving forward, port congestion is expected to be a significant hurdle as vessels will be arriving outside of their slotted appointment times and in large numbers as they all make their way through the canal in quick succession.

How is the Suez Canal incident impacting international supply chains in the long run?

The incident has mounted further pressure on global trade during a time when it was already feeling equipment shortages due to the COVID-19 pandemic, especially in and out of Asia.

With that, companies are now embracing just-in-case supply chains. That means businesses keep much higher inventory levels on hand to avoid being caught by disruptions such as the pandemic. This strategy minimizes the probability that a product will sell out of stock. In comparison, just-in-time supply chains aim to minimize inventory costs by producing the goods after the orders have come in.

Søren Skou, Chief Executive Officer at A.P. Moller-Maersk, told the Financial Times that companies have already been changing their supply chains because of the COVID-pandemic. The Suez Canal blockage will accelerate this ongoing global shift away from just-in-time towards just-in-case supply chains.

"The Suez Canal incident will make people think more about their supply chains."

Søren Skou, CEO of A.P. Møller - Mærsk

The ongoing unprecedented events and resulting disruptions can significantly impact the transformation of your business' supply chains. Read here how you can strengthen your supply chain in unprecedented times.

What Twill is doing to keep you further informed

The ongoing situation will impact bookings for potentially a few months. As we begin to better understand the impact of the delays across the vessels, port and terminal backlogs, we will be able to open booking accpectance again on affected trading routes. We will of course keep you updated if your booking is affected.

Please head over to Maersk's advisories for further information on the Suez Canal incident and its implications on international trade and supply chains. If you have any additional questions or concerns about this situation, please get in touch with one of our Twillers. They are here to help you and guide you through this situation. We are also keeping you updated via our dedicated FAQ.

While this event is out of our control, we apologize for the inconvenience this incident may cause your business. We will, of course, do our utmost to mitigate the delay as best as we can, and we will keep impacted customers up to date.

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