“We’ve been talking for a while how the economy of scale for one portion of the industry, the marine asset, doesn’t necessarily equate to an economy of scale for the entire supply chain,” says Andrew Kinsey, senior marine risk consultant at Allianz. “We’re seeing this with the ultra large container vessels when we talk about port infrastructure — raising of bridges, dredging of harbors, raising of cranes. And that’s just to service them when they’re in good condition.”
Following a number of incidents in recent years, the shipping industry should question whether it is running acceptable levels of risk for large vessels, said Kinsey. “There is a push for efficiency and scale in the shipping industry, but this should not be allowed to give rise to unacceptable levels of risk.
“We continue to see the normalization of risk in the shipping industry. There have been welcome technical advances in shipping, but we do not yet see a commensurate safer environment. There is now much talk of automation and autonomous vessels and how this will be safer. But in truth, innovation will be driven by the bottom line.”
Chris Turberville, head of marine hull and liabilities for the U.K. at Allianz, said, “It is very clear that in some shipping segments, loss-prevention measures have not kept pace with the upscaling of vessels. This is something that needs to be addressed from the design stage onwards.”
Kinsey pointed to the 7,510-TEU Yantian Express, a Hapag-Lloyd containership that caught fire in January while crossing the Atlantic, as an example of how vulnerable large ships can be.
General average requires shippers to contribute to the expenditures made to preserve a ship and its cargo.
“We can’t be worrying about putting out fires on ships,” said Kinsey, saying dangerous cargo has to be prevented from getting loaded aboard vessels.
Stricken ships may have trouble finding a place of safe refuge, since ports don’t want vessels in distress in their ports and tying up their infrastructure.
The Yanntian Express, for example, was coming from Sri Lanka and bound for Halifax, but when Hapag-Lloyd declared general average, the ship was towed all the way to Freeport, Bahamas.
With the increasing size of ships, “looking at the sheer volume of these vessels —it’s rewriting how general average is being looked at and conducted because there’s just so much real estate and infrastructure that these incidents are taking up.”
In another high-profile casualty, a 2018 fire aboard the even larger 15,226-TEU Maersk Honam, five seafarers lost their lives. General average work was performed in Jebel Ali. But Kinsey noted, “You don’t always get the situations where you can go into a United Emirates port equipped to handle those vessels and has extra capacity.”
According to a presentation by Tony Brain of Braden Marine, the Maersk Honam was carrying 7,860 containers (3,300 20-foot containers and 4,500 40-foot containers).
Damage was concentrated in the forward part of the ship, but still Allianz said “salvage and general average represented close to 60% of the cargo value. A high contribution has also been requested for the Yantian Express.”
While the Allianz report found the number of “total loss” casualties of ships decreased last year, Kinsey said another troubling trend is climate change and the effect that may have on shipping along the Mississippi River.
“We just saw the first of this month on Saturday hurricane season started,” said Kinsey. “This is the first time I believe any of us have seen a hurricane season start with a river running this high for this long.”
At the time of Hurricane Katrina in 2005, “I believe the river was at 4 feet; now we’re over 16 feet. So the levees are already, up and down the Mississippi, being pressured; the infrastructure is strained. If we were to look at a hurricane event coming up the Mississippi pushing water even more, I have no idea what would happen, but it would not be good. There’s a lot of people worried about it and we should be worried because we’re entering uncharted territory.”
High water is delaying grain and soybeans from being loaded on ships.