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General Average and further estimated developments after Suez Canal blockage

General Average and further estimated developments after Suez Canal blockage

23. April 2021
Ever Given

It has been one month since the Ever Given, one of the world’s largest container vessel, ran aground in the Suez Canal blocking the important waterway in Egypt. After 422 ships got stuck, the container vessel was freed after 6 days. Nevertheless, as reported by Reuters news agency, it is estimated that the consequences will be felt until summer. According to the CEO of the Hamburg port logistics group HHLA, Angela Titzrath, it would take another three to four months for the situation to clear up. Additionally, during this time freight prices will not relax either. 

General Average – Who pays the costs incurred?

On April 1st, the shipping company Evergreen Marine declared “General Average”. But what exactly does that mean? General Average is the term used when extraordinary expenses, such as salvage or sea throwing of the goods, are necessary for the rescue of the ship and its cargo. According to the legal regulations of maritime law, the resulting costs are borne jointly by the ship and the cargo. This regulation reaches back to ancient times and was included as part of the York-Antwerp Rules in 1980. How the costs are shared is decided by the average adjuster. He or she is responsible for determining how the costs are to be handled and for determining the respective shares. Besides, the whole procedure can stretch over a long period of time. Therefore, all parties involved are required to deposit a security. By the way, until payment is made the shipping company has a lien on the sea freight in question. This means that the traders will not get their goods back until they have paid the security. In the end however, participation in the costs also depends on whether or not fault can be established on the part of the shipowner or the master. 

Updated analysis about Asia-Europe export capacity  

After the shipping lines have now re-organized their operational schedules, the shipping analysts at Sea-Intelligence have updated their analysis of the ripple effects on Asia-Europe network capacity. According to the former analysis, the Asian ports would feel the effects of the Suez Canal blockage, especially from mid-May with a strong decline in export capacity. With the updated analysis, they see an improved forecast which you can see here. After all, they expect that Asia-North Europe trade is on track to have the effects caused by the Suez Canal Blockage removed by early June. 

Documentation and transparency against emerging chaos

Events such as the Suez Canal blockage demonstrate the importance of transparency and documentation along the supply chain, in addition to sufficient insurance. Without insurance, an incident like the Ever Given salvage can result in heavy losses. Therefore, it is important to check whether average is included in the transport insurance. A transparent supply chain supports the responsiveness to unforeseen events. And good documentation helps to trace back the entire process. On top of that, it enables you to prove individual steps in case of unresolved issues. With the supply chain management software at limbiq.com, deliveries can be tracked and process steps are accurately documented to avoid the resulting chaos when unforeseen events occur. Additionally, it saves valuable time through efficient communication. Feel free to contact us for more information.

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