What’s next, for the Ever Given and the shipping and freight industry

Many journalists and Twitteratis around the world might be having withdrawal symptoms after the Ever Given has been refloated from being stuck diagonally across the Suez Canal..

Although the vessel was stuck for only 6 days, I think this has been the most amount of media coverage that the shipping and freight industry has received in a very long time with many mainstream media reporting about it and world leaders speaking about it..

And now that the “boat” that was stuck in a “canal” has been refloated and all “Issuez have been resolved“, let us see what’s next for the Ever Given and the shipping and freight industry..

Couldn’t resist adding this meme from Amul who have some of the best ads in the world – always relevant and always on point..

 

Status

First off, the Ever Given itself was towed from where it was stuck, to the Bitter Lakes area in the East Mediterranean to recuperate from the trauma that it was subjected to, what with people and machines tugging, pulling, pushing, digging around and under………………..


While at the Great Bitter Lakes, the ship will undergo an inspection of its seaworthiness and the outcome of this inspection will determine whether the ship can resume its scheduled service or may need to be moved to an alternate port in case any issues are detected..

It has been reported that experts are already on board the ship to find out answers as to what went wrong and how it all went down..

It is also understood that the ship’s Voyage Data Recorder (“black box”) has been retrieved and will be handed over to the Panamanian Ship Registry officials with whom the Even Given has been registered with..

Panama is the world’s largest ship registry and is expected to undertake a serious investigation into this incident as required under international maritime conventions and report the same to the International Maritime Organisation (IMO)..

As per Admiral Osama Rabie, head of the Suez Canal Authority (SCA), “The ship was ready for limited navigation after an initial inspection and not a single container was damaged, but a second investigation will be more precise and if it was affected it will show“..

While we wait for further reliable information from the authorities or entities involved with the ship, let us take a look at the economic impact that this incident has had on global trade and the ports..

 

Economic/Trade Impact

While the canal navigation has been reopened and the ships are moving, the backlog created by the incident is still being cleared and is expected to take several days in both directions..

Since the reopening of the canal, it has been reported that as many as 109 ships have transited the canal between the 29th and 30th of March and at this pace, it is expected that the queue of almost 350 odd ships will be cleared by the end of this week AGW..

In the meantime, it is expected that shipping lines may change or need to change their service networks to minimize the impact of the incident in terms of port congestion at various ports..

In their Suez update, Maersk Line has advised that their next challenge will be to get the delayed services back on schedule stating that “as we have near 50 vessels delayed for a full week or more due to the Suez blockage, either waiting at the Canal or being redirected South of Africa.

When the delayed vessels start hitting the next load ports in both Asia and Europe, we cannot avoid a significant impact on our equipment availability and capacity availability in the coming period.

We urge our customers not to think that the situation is resolved and advise you to prioritise the most urgent/critical goods to be shipped first due to the foreseeable limitations in the weeks to come.” the statement added..

In order to mitigate the impact on lost capacity Maersk Line has also decided to temporarily cease short term bookings placed via Maersk Spot, as well as short term contracts from this week till the immediate future on selected trades..

Many of the container shipping lines are trying to balance these delays with the need to ensure consistent empty equipment flow and also effective terminal operations and handling capacities at all affected ports or ports that could be potentially affected..

 

Claims

On the claims front, while no damage to any containers have been reported on the Ever Given itself, there are widespread conjectures that insurers are expecting the worst in terms of the claims that might be placed on them including General Average..

These claims are expected to be in the form of liability coverage claims from owners of the ships that have been delayed in their passage via the Suez Canal..

Money

These claims could also include

  • ship delays,
  • cargo delays,
  • factory and assembly line stoppages,
  • loss of sales by various retailers,
  • ship owners losing out on other employment due to the delays and
  • potential penalties if the ships don’t reach the intended port of load or discharge in time

Some of the ships that chose to avoid the delays at the Suez Canal and rerouted via the Cape of Good Hope may also claim for the approximately 10 odd extra days it takes on this longer route and the costs of hundreds of thousands of dollars in bunkers and other costs..

The HMM Rotterdam which was among the first ships to reroute via the Cape of Good Hope on its way from London Gateway to Singapore will now arrive at its destination 3 weeks later than its original ETA affecting many customers and businesses..

It has been reported that the Ever Given has a liability coverage of $3.1 billion, but as per industry experts, it is unlikely that this will be enough to cover all the potential claims..

Of course there is also the possibility of a claim by the Suez Canal Authority’s claim on the ship owner/operator of the Ever Given for loss revenue through the canal which in itself is said to be around $14-15 million per day.. The Suez Canal had a revenue of around $5.6 billion..

 

Impact on trade/ports

The arrival of ships at various European ports (especially the North European ports) directly from the Suez Canal and/or the ones that have been routed via the Cape of Good Hope is expected to be sinusoidal which may cause port congestion and related issues such as berthing delays, shortage of trucks to move containers, requests for extension of free days on demurrage and detention to clear container backlogs so on and so on..

There is also talk about some of the shipping lines being forced to implement blank sailings as there are no “extra” ships on some of the services to cater for the gaps caused by the congestion resulting from the incident..

To avoid these delays, some of the shippers in China could use the OBOR (One Belt One Road) and take advantage of the quick transit that the rail network offers between China and Europe..

obor - freight rail - shipping and freight resource

A container train from Chengdu on the Yangtze river can reach Vienna in Austria in a mind boggling 14 DAYS covering a distance of 9,800 kms..

This same journey would take a ship travelling @15 knots about 30.8 days of pure sea transit not counting any waiting time, transhipments etc..

This Chengdu to Vienna train is one in the long list of containerised freight trains on the China – Europe route.. The first China-Europe line was launched in 2011 between southwest Chongqing and Duisburg in Germany..

A container ship that cannot pass through the Suez Canal (like when the Ever Given was stuck) takes about 24,000 kms to reach Europe while the China-Europe train takes less than 11,000 kms to reach the same place..

Of course in terms of cost comparison with sea freight, the rail option will be extremely expensive, but it may not be as much as the companies or vehicle assembly lines may suffer if their work comes to a standstill..

 

What’s next

This incident has brought to the fore, one of the current hotly debated topics in terms of how big is big and and how big is enough especially with the ULCV (Ultra Large Container Vessels)..

evolution of container shipsWhile two decades ago, no one imagined that we would see container vessels with 24,000 TEU capacity, it is here in real life now..

The ports and terminals have had to adapt to the handling of these bigger ships and this has further encouraged shipowners and ship builders to go for bigger and bigger on the back of perceived economies of scale which is a debate for another day..

Once the investigations on the Ever Given are completed and the reasons for the incident has been identified, many entities including ship owners, flag states, ports, canals, insurers will no doubt put up necessary checks and balances in place to avoid recurrence..

As ship sizes grow and climate change gets more intense, may be specific navigation procedures will be set in place for ships over a particular length and beam when crossing the various canals around the world..

Insurers may consider charging higher insurance premiums to cover themselves against these exigencies..

On their part, the Egyptian Government has committed itself at the highest level (President Abdel Fattah al-Sisi) to have a working canal at all times even if this means acquiring necessary equipment for the Suez Canal to avoid recurrence as there will still be many of these behemoths passing through..

The “boat in the canal” saga has indeed reminded the maritime industry to “expect the unexpected” and not to take anything for granted whether you are the world’s largest container ship or just a canal on an important trade route..

*** End of Article ***

3 thoughts on “What’s next, for the Ever Given and the shipping and freight industry”

  1. The question that many would ask : Why should the Shipping company pay for the errors of the Pilots of the Suez Canal Authority who made the ship move at 13 knots when the speed limit is 8 knots? One is informed that the shipping company, Captain and crew have been made scapegoats. Consider what happened during the penultimate crossing by the same ship a few weeks earlier : It is being said that the Suez Canal pilots routinely demand free cartons of Benson & Hedges cigarettes (which they later sell in the black market to make extra money). Evergreen shipping has a strict NO BRIBE policy and this was explained to the 3 Suez Canal Pilots each time they made the demand. The 3rd Pilot took this policy very badly and refused to guide the Captain and crew. The captain called up the Suez Canal Authority urgently to report this situation – then the Pilot grabbed the Mic and started screaming in Arabic. In the meantime the ship grounded and the rest is known to everyone. The big question is whether Suez Cana Authority will crack down on corruption or not. This is not the 1st instance and bribes are sought daily by the pilots from each ship. Reference – perhaps you may like to search for eksisozluk (dot) com (slash) entry (slash) 121311118?fbclid (equals) IwAR3JuLGd1YqEVRKHfIH6MWEWDRwwdqeHFMTB3L4spdLJNr7NzP46Z1Y1HeY

    Reply
  2. Concerning claims that my rise within general average declaration they will have some limits. Indeed only losses in connection with extra ordinary sacrifices and intentionally expenditures are concerned as per York Antwerp rules 1994.
    Concerning the claims in connection with delay (ship delays, cargo delays, factory and assembly line stoppages, loss of sales by various retailers…) matter depends on Bl condition.
    I don’t think that Hamburg rules to apply but generally Bl are endorsed to Hague or Hague-Visby rules with their limits in what concerning claims in connection with cargo arrival delay.

    Reply
  3. Some incident like the Ever Given stuck at the Suez Canal opens up for critical thinking. With advancement in technologies it’s hope that authorities and technocrats will come out with effective measures to contain the situation if it ever occur again.

    Reply

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Share