Middle East Situation Overview 1

The situation in the Middle East continues to evolve, with changes happening rapidly. As your trusted logistics partner, we understand the need for a comprehensive overview of the different elements impacting your supply chain. See below for a consolidated overview of the ongoing situation and how it is impacting key aspects of your logistics.

Situation overview

The situation remains at a high-risk level, with continuing strikes occurring landside and at ports throughout the Strait of Hormuz area as well as in impacted countries. As the time of sending, all ports are operational; if the status of any port does change, we will inform customers as soon as possible. Stay up to date on port operations in the area here. The situation is fluid and our security and continuity teams are continuously engaged to monitor for any changes that may further impact our operational capabilities in the region.

We remain vigilant and are working closely with local authorities and officials to keep all crew and employees safe, as well as safeguard our vessels, ports and your cargo. Currently, all offices, ports and additional assets, such as distribution centres, vessels and other Maersk operated sites in the region, are functioning at highest ability in relation to the situation.

Operations

We are continuing to see disruption to our logistics operations; and while we are committed to delivering our reliability target of 90% on Gemini services, the situation will impact our performance numbers. We are working hard to minimise the negative implications as best as possible in the current circumstances and will continue to target industry-leading reliability. The situation in the Middle East and subsequent network adjustments have widespread ripple effects on the rest of the global network, and it takes time for operations to be implemented and settle. After which, during the course of Q2, we expect to deliver schedule reliability in line with previous levels.

In terms of fuel, the ongoing conflict has considerably disrupted international markets. Many refineries in the Middle East are either offline or operating at reduced capacity due to the closure of the Strait of Hormuz, limiting export ability and causing substantial disruptions to global supply chains. To preserve network stability and further reliability, we have redistributed fuel demand as far as possible to offset shortages and are securing alternative sources from different locations and suppliers. Due to fuel shortages in the Middle East and adjacent areas, some vessels must refuel at ports that may include additional war-zone fees, further increasing costs.

With notable fluctuations in fuel supply and the extra costs associated with reduced supply and distributing demand under these exceptional circumstances (which fall outside standard Fossil Fuel Fee (FFF) adjustment), it has been necessary to introduce an Emergency Bunker Surcharge (EBS). Examples of fuel-related costs that are not captured in the standard FFF include fuel that must be secured at a war premium or above reference index in different bunker locations than our normal bunkering pattern, to ensure operational continuity and supply chain resilience. Higher prices at alternative ports, network deviations, and the need to induce vessels to ports solely for bunkering all contribute to increased costs, and as such are not captured in the FFF.

It should be noted that a significant portion of these additional costs occur outside the war area, and they are by no means confined to cargo moving to or from the Middle East. We face significant ripple effect that impacts the ensure global network.

Customer solutions

We understand that disruptions have a deeply adverse impact to your supply chain. To soften the impacts to your logistics in and around the impacted region and ensure alternative gateway access to the Persian Gulf countries, we have implemented the following:

• Contingency solutions, including change of destination, temporary storage or return to origin
• Implemented landbridge solutions throughout the region
• Air solutions
• Visibility tools like our vessel and port updates, updated daily
• frequent updates on the situation

Outlook

Looking ahead, we expect the operating environment to remain volatile. The Strait of Hormuz is likely to remain closed to commercial cargo vessel transits, and air corridors across the region are expected to continue experiencing disruption due to airspace closures affecting several Gulf states. We will continue to monitor the situation closely and provide further updates as conditions develop.

Further information

We will continue to keep you updated on the situation via our dedicated Middle East Situation page. Should you have further questions, please do not hesitate to reach out to your local Maersk representative. Our teams are on hand to support with your planning, should you need any assistance.