The Suez Canal Crisis and the Challenges Arising from It

As the media has been reporting since late December, many shipping companies are avoiding the Red Sea and the Suez Canal following a series of attacks on vessels by the Houthi militia in Yemen.

Due to these events, ships are bypassing the Suez Canal and being rerouted around the Cape of Good Hope. As a result, transit times have increased by up to 4 weeks.

Consequently, shipping companies are imposing surcharges for the detour through the Cape of Good Hope.

An additional challenge is the so-called bullwhip effect, which describes a phenomenon in the supply chain where small fluctuations increase and can have considerably large effects downstream.

There are concerns that alternative routes could lead to congestion at ports that are not accustomed to handling such large volumes of traffic. Additionally, there may be a shortage of cargo space and empty containers might end up stranded in unconventional locations. Such complications could further exacerbate delays and possibly affect other shipping routes aside from those between Europe and Asia, a situation we experienced two years ago.

Currently, it is uncertain how long the Suez Canal will remain unnavigable due to the attacks. However, it is expected to be a matter of months rather than weeks. Given the longer delivery times, reserve stocks are almost indispensable. Therefore, we recommend placing precautionary orders.

Regarding the aforementioned challenges, we recommend sensitizing customers to place orders in advance, so there are enough opportunities and flexibility to contract and meet the desired delivery dates.

We are confident that we will overcome this crisis bravely together with our customers and partners, and maintain supply capacity.