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The Suez Canal Ripple Effect

March 29, 2021

Everyone’s been talking about the accidental grounding of the container ship Ever Given on March 23 in a critical stretch of the Suez Canal. It was finally refloated on March 29, and the Suez Canal Authority is actively clearing the backlog of ships awaiting transit for almost a week through a route that handles approximately 12% of global trade volumes.

Cargo ships encounter problems that delay their arrival or impact their cargo with some frequency. Most often the cause is weather and heavy seas, which accounted for the loss of 750 containers from a container ship operated by A.P. Moeller-Maersk A/S back on Jan 21 of this year.

But the situation with the unfortunate Ever Given vessel was very different. All of its cargo remains intact, but the vessel itself ran aground in a very narrow stretch of the Suez Canal that prevented ANY other cargo ship traffic from moving either north or south along this vital sea trade route.

If your company has containers aboard the Ever Given, you probably know that by now and are making plans around very late cargo deliveries.

But what about the other ships that were trapped above and below the blocked chokepoint, and those still gathering or staged outside of the narrowest passages of the canal?

And what will the impact be on already congested ports when scores of delayed vessels stacking up for canal passage are suddenly freed to move, and begin arriving en masse with hundreds of thousands of TEUs worth of imported goods?

If you were managing your global freight activities with Infor Nexus, not only could you know the scope of your orders and specific goods at risk with containers ships now in the canal, or on their way to it, but your supply chain visibility would extend to orders and ships that have not yet left ports of origin, giving you precious breathing space to potentially shift some goods to Silk Road rail overland from Asia to Europe, or to plan emergency shipments via air cargo.

The order-centric operational visibility that shippers can realize with Infor Nexus means they can be highly proactive in notifying their own customers, whether internal or external, about potential delivery delays, and work with them to find the best solutions to avoid disruptions and minimize lost sales.

The last time a wayward ship similarly blocked Suez Canal traffic was in 2017, when a Japanese container vessel ran aground due to mechanical troubles. It was safely refloated and traffic was cleared through the canal within hours of the incident.

Similar efforts were attempted with the Ever Given since it grounded last Tuesday, but the fully loaded ship was so badly stuck that it took extraordinary efforts both on land and in the water to shift it.

Higher tides and dredging of sand in front of the vessel finally enabled tugboats to move the trapped vessel back in to the shipping channel. A collective sigh of relief attended news that it would not be necessary to remove the cargo containers, and possibly fuel and ballast, to refloat the ship.

A number of ocean carriers did elect to avoid the Suez route in the past week and sail selected vessels instead around the southern tip of Africa—the Cape of Good Hope. This alternate route adds approximately 12 to 19 days of transit time to the normal length of a Suez-routed journey.

For European importers waiting on containerized goods over the next four to six weeks, these alternate sea routings as well as the cumulative delay from waiting on the canal to reopen will have to be factored into their inventory planning, product scheduling, and store replenishment cycles. While transit time variability of 3 to 5 days from planned service times are not uncommon and can normally be accommodated in the ‘slack’ or buffer time that logistics teams build into their ocean freight scheduling, an extension of two or more weeks to inventory lead times has far more serious implications. And more delays are sure to follow.

The impact of the canal shutdown will be felt for weeks to come in global trade lanes, even though the worst-case container unloading scenario was avoided. European ports, already battling congestion since the previous year from exceptional import volumes, now face an onslaught of inbound cargo ships that will be arriving more or less on top of one another. The time required to process and unload the backlog of ships will further upend the return flow of empty containers to Asia, where they are needed to start the origin leg of much foreign trade activity.

Sailing schedules will see significant revisions for the next few months as the sharp wrinkles caused by the Suez Canal blockage are slowly ironed out of global freight networks.

Delays, exceptions and even disasters are something that global logistics organizations, including forwarders and third-party logistics (3PLs), have to contend with regularly in the course of their daily work. But a situation with the far-reaching sea-traffic and commercial trade consequences of this Suez Canal blockage comes on top of a previous year’s worth of uncertainty, volatility and cost increases that can only further exacerbate supply chain angst and import/export frustrations.

Register for a demo today to learn more about how Infor Nexus can help you monitor your global freight shipments. Request a demo.

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