- After the Ever Given blocked the Suez Canal, industry insiders are taking note of other risks.
- Bigger ships, more automation, and smaller crews are concerns, said Capt. Rahul Khanna, of Allianz.
- Climate change has made a shipping route through inhospitable Arctic waters more popular.
- See more stories on Insider’s business page.
Shipping vessels have grown larger by multiples in just a few years, adding to worries among some industry insiders that a single mistake made by a massive ship could cause a global supply chain disruption, as the world saw with the Ever Given.
That ship, which was stuck in the Suez Canal for about a week in March, slowed or stalled shipping traffic around the world. It was estimated to cost the global economy about $400 million per hour, and its effects have still been rippling through the economy in recent weeks.
As ships like the Ever Given have grown over the last few decades, their crews have been shrinking because they’re using more automated processes, said Captain Rahul Khanna, global head of marine risk consulting at Allianz Global Corporate & Specialty, whose team publishes an annual safety review.
“Decades ago, the ships with 3,000 TEU – that’s the number of twenty-foot containers that can fit onboard – were considered the big ones,” said Khanna.
Now, ships like the Ever Given carry maximum loads of more than 20,000 containers. Boat-building technology could in the years and decades ahead produce ever-larger ships, perhaps growing to 50,000 containers or more. If there’s demand for such ships, modern technology could allow for such builds, Khanna said.
Between 2006 and 2020, the largest shipping vessels in the world grew by 155%, according to a January report from the United Nations Conference on Trade and Development. The biggest ships are loading or unloading 125% more at each port they visit.
With bigger boats, there could be more impactful accidents.
“While seemingly efficient, they are too large to fit in some ports, increase dangers in storms, and highly piled containers are falling, causing product and the corresponding financial losses,” said Cheryl Druehl, associate professor of operations management at George Mason University.
Even the Ever Given debacle, which grabbed hold of the worldwide news cycle, could have been worse. If that ship’s hull had broken, say, it would have taken even longer to fix the issue, Khanna said. It’s likely that a crane would have had to have been constructed nearby to remove some or all of its load. Refloating it would have been a more complex task, likely stretching into months.
Surveying the world’s riskiest shipping routes
As the shipping industry gets back to its normal routine, Khanna and other shipping industry insiders walked Insider through their concerns about the next big disaster. The most obvious answer was that another ship could get stuck in the Suez or Panama canals. The risk of a situation similar to the Ever Given’s crash in one of those waterways was “unlikely but high impact,” said Ambrose Conroy, founder and CEO of Seraph, a consulting and turnaround firm.
The risk was lower at other heavily travelled shipping lanes, including the Singapore Strait, and the Strait of Hormuz, although it has geopolitical risks of its own, said Khanna.
Ports in the future may also have trouble handling larger ships, but that’s an issue that can be fixed with proper planning, Conroy said. Instead, it’s the “black swan events” like the Ever Given that the industry needs to look out for.
One concern is a shipping route that’s becoming more popular. In decades past, a lane through the Arctic would open in summer months, giving ships a more direct path between Europe and Russia.
As the climate crisis has reduced the amount of ice in those northern regions, that passageway is now increasingly being used in the winter. It’s become so popular that the International Maritime Organization issued a revised Polar Code.
As the Ever Given stalled global shipping in March, Moscow officials pointed to the Northern Sea Route through the Arctic as an alternative.
But Arctic travel comes with its own risks. While it’s unlikely that modern ships, with all their technology, would hit an iceberg, smaller ice floats can still damage hulls, Khanna said. An oil spill in the Arctic would also be devastating to marine life. And rescue crews might have difficulty reaching a stranded ship in such inhospitable waters.
Concerns about long journeys during the pandemic
Shipping industry observers also say the health and wellbeing of ship crews are a growing concern for 2021 and beyond. Shipping can take crews around the world – “It’s easier to list the places I haven’t been,” said Khanna – but many haven’t been able to visit their homes since the pandemic began.
“Crews haven’t been able to go back home on their leave,” he said.
Automation hasn’t helped, said Druehl, the George Mason professor. With more automation, ships have been able to stay away from their home ports longer. And it’s brought up issues like “skeleton crews, leading to more isolation and risk of piracy.”
Decentralizing the manufacturing industry is one possible way to cut risk, said a few industry insiders. Bring manufacturing back in the parts of the world that have become importers, and shipping won’t be as much of a concern, they said. But that’s easier said than done.
“The intricacies of global logistics are meaningless to most, that is until the truck doesn’t show up and the shelves go empty,” said Richard Weissman, director of the Organizational Management Program at Endicott College.
Issues caused by the Ever Given were still trickling through the supply chain in the last few weeks, he said. But most people won’t notice, unless they’re among the few who actively follow supply chains.
He added: “Once freight crosses the threshold of the loading dock and the truck door closes, we tend to forget about it. That’s the one thing that has to change now.”
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