The Suez Canal: a lesson well learned

JML Commercial Director Andrei Mironov's view on the background and consequences of the situation with the container ship Ever Given

Question: When talking about the preconditions of the situation in the Suez Canal, the main reasons were first called dust storm and strong wind. Then there was a version about technical failures and human factor. But the majority of experts tend to believe that the crisis had several preconditions, and in general, such situations rarely have only one cause. As a rule, it is a chain of factors or mistakes. Why do you think there was a collapse in the Suez Canal?

Andrei Mironov: “Now in logistics and not only, global transformations are taking place. As the pandemic eased, the load on networks - be it sea routes or railroads - multiplied. It turned out that the system was not ready for such challenges. Stations, terminals and ports are not able to process incoming cargo, container trains are abandoned on their approaches, there is congestion, and cargo transportation deadlines are not met. Many terminals and ports have exhausted their resources and cannot process the growing cargo flow.

Therefore, the incident in the Suez Canal is the result of interrelated and interdependent events in the world economy, particularly in logistics. The situation has shown that the logistics system is not insured in any way and can fail at any moment.

In order to start solving visible problems, it is necessary to finalize basic legislative documents, investments and joint dialog at the interstate level are required. It is necessary to develop, approve and build alternative routes, update the technical base of transportation and receiving and loading equipment.

In particular, logistics companies should differentiate their routes and offer customers new solutions, as well as have alternative options for cargo delivery.”

Q: The situation has normalized, and the traffic jam has been eliminated. But experts say that the situation still affects logistics, because the delayed ships create a queue for unloading. Does your company feel the consequences of the incident?

Andrei Mironov: “The Egyptian government has filed a billion-dollar claim against Ever Given, because the canal blocked the movement of ships due to the fault of the container ship. But we must recognize that the canal is obsolete and shallow, it was built a long time ago and not for such use.

Of course, like everyone else, we are experiencing delays in cargo delivery, transportation time is increasing. Our company has faced the fact that the quality of services is decreasing at all hubs. The ports do not have time to process and accept cargo, queues are accumulating. But we accept orders as before and offer customers alternative logistics solutions in order to fulfill contractual terms and preserve partnership relations.”

Q: What lessons do you think the global logistics industry has learned from the situation?

Andrei Mironov: “It often happens that lessons are learned, but work on mistakes is not completed. Obviously, we need to update the equipment, develop new routes, check existing routes in detail and analyze their capacity. Existing routes will continue to be used, but they cannot withstand the increased load. This applies to rail, sea and road transportation. There is a need to install systems to prevent accidents and minimize the impact of human error.

Inbound and outbound cargo flows to Russia from China are more or less even, because Russia ships natural resources to the Celestial Empire and receives finished goods. To America and Europe, the incoming flow is much greater than the outgoing flow. Therefore, the turnover of containers increases in terms of time. After unloading, it is necessary either to wait for the return load, or containers must be returned empty, which increases the cost of transportation. Accordingly, there is a shortage of containers in which to load outgoing cargo from China, and therefore the cost of transportation increases, because the rule “demand gives birth to supply” nobody canceled. Pricing for transportation, as recent events have shown, is not regulated by anyone and in any way.

It is very important to develop mechanisms to regulate the cost of services in order to avoid a natural increase in the cost of transported cargo and possible uncontrolled consequences of such actions.