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The Suez Canal blockage and mega ship risks

The grounding of an ultra large container ship in the Suez Canal brought traffic on the central shipping route between Europe and Asia to a standstill. In this Q&A, AGCS Global Head of Marine Risk Consulting, Captain Rahul Khanna looks at some of the potential implications of this incident and highlights some of the risk challenges posed by ever-increasing ship sizes.

How do operators approach the salvage of such a huge ship? What are the challenges?

Container-carrying capacity on ships has increased by 1,500% over the past 50 years and has doubled over the past decade and a 224,000-tonne, 400-metre-long vessel which can carry up to 20,000 containers like the MS Ever Given is in the top 1% in terms of size of vessels on the ocean. Obviously, the size of these vessels make a salvage operation a significant undertaking. For some time now many in the salvage industry have warned that container ships are getting too big for situations like this to be resolved efficiently and economically.

Dislodging a “mega ship” in a confined space like the Suez Canal will be challenging, requiring the expertise of a specialist salvage company - not all have the experience of dealing with such vessels. Their first job is to assess the degree to which the vessel is aground, and what could be the safest and quickest way to refloat the ship. A best case scenario would be that a combination of high tide and adequate tugs may free the vessel. However if the vessel is hard aground then lightening the vessel may be the only option and containers may have to be removed from the ship. This will delay the salvage/refloating process and is going to make the operation a lot more expensive.

Assuming that the grounding of the Ever Given will continue, what are the potential claims scenarios in scope from an insurance perspective?

It's still too early to comment on the causation of this incident as a number of different factors have been cited as contributing to the incident in reports. However, potential claims scenarios could include damage to the vessel’s hull and engine (if there was a machinery breakdown issue – a frequent cause of marine insurance claims); damage to the propeller and its shaft if the stern is aground as well; salvage and vessel removal costs - which can quickly escalate particularly in the event of wreck removal; third party liability claims especially with regards to damage to the canal; loss of any perishable goods in cargo; and business interruption and loss of revenue claims as a result of this blockage.

If ships are unable to go through the Suez Canal, is there any chance they can take the longer route around the African coast?

The option of going around the Cape of Good Hope (COGH) is always available although it adds around 5,000 nautical miles or 9,000 kilometers to a typical journey from the Middle East to Europe. From Singapore to Europe it probably is less, around 3,000 to 3,500 nautical miles.

This means a lot more fuel consumption and a much longer journey time (around 10 to 15 days more depending upon the speed of the vessel). Therefore, such a consideration is considerably more expensive but the ship can save on Suez Canal fees. The weather is another consideration as this can deteriorate while going round the Cape. Therefore, it’s not the first route choice for smaller vessels who may not even have the fuel capacity. Much also depends on the price of fuel and prevailing ship charter rates. Sometimes higher fuel prices and charter rates combined could make the longer journey cost-effective. For a few days blockage it probably doesn’t makes sense for ships to reroute, only if a longer term delays are envisaged.

Stuck at sea

 

Andrew Kinsey in The Wall Street Journal: "The Ever Given was moving through an area of the canal with cut outs in the banks that can affect vessels with what is known as a “bank effect”, in which the rear of a ship can swing toward the nearest bank when moving through a narrow waterway." Read the full article: https://lnkd.in/de9FFYj

Capt. Rahul Khanna on BBC Radio 4: “The existence of a new generation of huge vessels which the canal has never been designed for presents a major challenge for the operators."