One notices the maritime traffic only when there are striking incidents such as that of Ms Ever Given, stuck in the Suez Canal. Otherwise, that of ships remains for most a world apart, little known, almost mysterious, far away. Yet over 80% of world trade is done by sea, and what ships carry comes directly to our homes.
In the Suez Canal, for example, which connects the Mediterranean to the Red Sea, 10% of global goods pass. It is the shortest route between Asia and Europe and ships will face long and costly detours if the canal is not reopened soon, read Cape of Good Hope and even Arctic routes. Ships save 9,000 km or 10 days by using the canal.
In a study by Allianz Global Corporate & Specialty, one of the leading marine insurers, which constantly monitors and analyzes risk scenarios in the shipping sector and publishes the Safety & Shipping Study annually, we read that ship traffic observers and brokers said that there were more than 100 ships waiting to pass through the canal and that the traffic jam created by Ever Given “comes at a particularly delicate moment for global supply lines. Car and computer makers are in trouble due to a global chip shortage, exacerbated by a fire at a large chip factory in Japan last week. Car manufacturers have closed their plants after a cold spell in Texas that hit plastic production at the beginning of the past few months and California ports have been hit by stops and delays ”.
Canal traffic and accidents
The Suez Canal is a crucial route for maritime traffic. Nearly 19,000 ships passed it in 2020, according to the Suez Canal Authority – an average of 51.5 ships per day. Suez, the Allianz Global report reads, has an excellent overall safety record with extremely rare boating accidents. There have been 75 navigation accidents reported in total in the canal in the last ten years and more than a third involved container ships (28).
Between 2013 and 2016, there was an average of 12 boating accidents per year, but the numbers have declined since then. The 10-year average is 8 accidents per year.However, grounding (such as the Ever Given incident) is the most common cause of canal navigation accidents – 25 in the past 10 years or 1 in 3 of all canal navigation accidents. Together with grounding, collision and contact accidents, they account for half of all navigation accidents in the Suez Canal in the last 10 years (38 in total). Machine breakdowns are the other leading cause of shipping accidents in the Suez Canal, with 21 accidents in 10 years.
There was only a total loss of a ship reported in the Suez Canal over the past decade – in 2010. The total loss in the Suez Canal was a cargo ship called the Maryam which sank after loading bitumen.
The risks of mega-ships
Container ships are getting bigger and bigger. To save travel and fuel, essentially. Especially on the intercontinental “highways”, in particular the US-China-USA line. Ships become mammoth, so much so that special ports have to be built and transshipment is aimed at transporting goods in smaller ports (goods are transhipped from mother ships to smaller units). The container-carrying capacity of ships, Allianz clacola, has increased by about 1,500% in the last 50 years and has almost doubled in the last decade.
Over the past decade, more than 200 container ship stranding incidents have been reported worldwide, accounting for about 1 in 10 of all container ship incidents.
The insured values of these vessels (hull only) depend on many factors, such as age, but range from $ 70 million for an older ship (say 2012) to $ 150 million for a new one.
Other major risks associated with mega-ships are fire extinguishing capability, secure cargo storage and misreporting of cargo; as well as saving difficulties given their size.
“Too big to be saved economically”
“Container carrying capacity on ships has increased by 1,500% over the past 50 years and doubled in the last decade and a 224,000 ton, 400 meter long ship that can carry up to 20,000 containers such as the MS Ever Given is in the top 1% in terms of size of ships in the ocean – says Captain Rahul Khanna, global head of AGCS of Marine Risk Consulting -. Obviously, the size of these ships makes a rescue operation a significant undertaking. For some time now many nIn the rescue industry they have warned that container ships are getting too big for situations like this to be solved efficiently and economically. “
“Deploying a” mega ship “in a confined space like the Suez Canal is challenging and requires the expertise of a specialized rescue company – explains Khanna -, and not everyone has the experience to deal with these ships. Their first task is to assess the extent of the ship’s grounding and what could be the safest and fastest way to get it back to the surface. At best, a combination of high tide and proper tugboats could free the ship. However, if the ship is heavily aground, lightening the ship may be the only option and the containers may need to be removed from the ship. This will delay the save / raise process and make the operation much more expensive ”.
Let’s take the case of Ever GIve, hopefully in the process of being resolved. What are the potential claim scenarios in scope from an insurance perspective? “Potential claim scenarios could include damage to the ship’s hull and engine (if there has been a machinery failure problem – a frequent cause of marine insurance claims); damage to the propeller and its shaft, if the stern is also run aground; ship salvage and removal costs – which can quickly increase especially in case of wreck removal; civil liability claims especially regarding damage to the canal; loss of any perishable goods in the cargo; and business interruption and claims for loss of revenue as a result of this block “.
We are seeing the impact on global supply chains. Lloyd’s List calculates the value of the blockade to daily shipping in the canal at 10 billion dollars. “These incidents show the immediate impact that the blockade of one of the world‘s main shipping routes can have and highlight how much global trade has become dependent on mega ships – says Captain Khanna -. The blockade comes at a particularly sensitive time for global supply lines. Car and computer manufacturers are struggling with a global chip shortage, exacerbated by a fire at a large chip factory in Japan. Automakers closed their plants after a cold spell in Texas earlier last month hit plastic production, and California ports were hit with blockages and delays. The canal is an important route for transporting oil and liquefied natural gas from the Middle East to Europe and there is also the potential risk of delay in shipments for advanced technology and automotive companies ”.