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Are there clouds on the horizon for a buoyant international shipping industry?

11th May 2022 - Author: Pete Carvill

A growing number of issues may stymie a healthy and growing international shipping industry, writes Allianz in its Safety and Shipping Review 2022.

The insurer cited several factors in the report, including the impact from Russia’s invasion of Ukraine, the growing number of costly issues involving larger vessels, crew and port congestion challenges resulting from the shipping boom, and managing decarbonisation targets.

The Safety and Shipping Review 2022 analysed reported shipping losses and casualties (incidents) over 100 gross tons. During 2021, 54 total losses of vessels were reported globally, compared with 65 a year earlier. Allianz wrote that this represented a 57% decline over 10 years (127 in 2012), while during the early 1990s the global fleet was losing 200+ vessels a year.

It went on to say that the 2021 loss total is made more impressive by the fact that there are an estimated 130,000 ships in the global fleet today, compared with around 80,000 three decades ago.

Captain Rahul Khanna, global head of marine risk consulting at AGCS, said: “The shipping sector has demonstrated tremendous resilience through stormy seas in recent years, as evidenced by the boom we see in several parts of the industry today. Total losses are at record lows – around 50 to 75 a year over the last four years compared with 200+ annually in the 1990s.”

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According to the report, there have been almost 900 total losses over the past decade (892). The South China, Indochina, Indonesia, and the Philippines maritime region is the main global loss hotspot, accounting for one-in-five losses in 2021 (12) and one-in-four-losses over the past decade (225), driven by factors including high levels of trade, congested ports, older fleets, and extreme weather. Globally, cargo ships (27) account for half of vessels lost in the past year and 40% over the past decade. Foundered (sunk/submerged) was the main cause of total losses over the past year, accounting for 60% (32).

While total losses declined over the past year, the number of reported shipping casualties or incidents rose. The British Isles saw the highest number (668 out of 3,000). Machinery damage accounted for over one-in-three incidents globally (1,311), followed by collision (222) and fires (178), with the number of fires increasing by almost 10%.

But Allianz warned about some storm clouds on the horizon.

The biggest risk to the industry, wrote the insurer, stems from the Russian invasion of Ukraine, which has impacted it on many fronts. Among these were the losses of life and vessels in the Black Sea, disruption to trade, and the growing burden of sanctions. It also faces challenges to day-to-day operations, with knock-on effects for crew, the cost and availability of bunker fuel, and the potential for growing cyber risk.

Khanna said: “However, the tragic situation in Ukraine has caused widespread disruption in the Black Sea and elsewhere, exacerbating ongoing supply chain, port congestion, and crew crisis issues caused by the Covid-19 pandemic. At the same time, some of the industry’s responses to the shipping boom, such as changing the use of, or extending the working life of, vessels also raise warning flags. Meanwhile, the increasing number of problems posed by large vessels, such as fires, groundings, and complex salvage operations, continue to challenge ship owners and their crews.”

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