Shipping Industry Faces Rising Challenges Amidst Record-Low Ship Losses

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  • Allianz Safety and Shipping Review 2024: 26 large ships lost worldwide in 2023, down by one-third year-on-year, the industry’s lowest-ever total
  • War and geopolitical conflicts shake up the shipping industry, with several major consequences

Climate risks are on the rise while decarbonization of fleets remains a major challenge as much as 90% of international trade is transported across oceans, maritime safety is critical. Thirty years ago, the global shipping fleet lost around 200 large vessels annually. This total fell to a record low of 26 in 2023, a decline of more than one-third year-on-year and by 70% over the past decade. However, the fact that shipping is increasingly subject to growing volatility and uncertainties from war and geopolitical events, the consequences of climate change, as well as ongoing risks resulting from the trend for larger vessels means the sector will have its work cut out to maintain this status quo in future, according to marine insurer Allianz Commercial’s Safety and Shipping Review 2024, according to an article published on their website.

 

Southeast Asia emerges as a maritime region with the highest total losses

 

During 2023, 26 total losses were reported globally compared with 41 a year earlier. More than 700 total losses have been reported over the past decade (729). South China, Indochina, Indonesia, and the Philippines maritime region is global have been hotspots, both over the past year and decade (184). It accounted for almost a third of vessels lost last year (8). The East Mediterranean and Black Sea ranks second (6) with activity up year-on-year.  Cargo ships accounted for over 60% of vessels lost globally in 2023. Foundered (sunk) was the main cause of all total losses, accounting for 50%. Extreme weather was reported as being a factor in at least 8 vessel losses around the world in 2023, with the final total likely higher.

The number of shipping incidents reported globally declined slightly last year (2,951 compared to 3,036), with the British Isles seeing the highest number (695). Fires onboard vessels – a perennial concern – also declined. However, there have still been 55 total losses in the past five years, and over 200 fire incidents were reported during 2023 alone (205) – the second-highest total for a decade after 2022. Fires remain a key safety issue on larger vessels given the potential threat to life, scale of the damage, and the fact associated costs can be severe, a factor contributing to the long-term increase in the cost of large marine insurance claims.

Recent incidents, such as in the wake of the conflict in Gaza, have demonstrated the increasing vulnerability of global shipping to proxy wars, disputes, and geopolitical events, with more than 100 ships targeted in the Red Sea alone by Houthi militants in response to the conflict. Disruption to shipping in and around the region has persisted and is likely to remain for the foreseeable future. The re-emergence of Somali pirates, following their first successful hijacking since 2017, is an additional cause for concern.

The report also notes that in the three years since Russia invaded Ukraine the gradual tightening of international sanctions on Russian oil and gas exports has contributed to the growth of a sizeable ‘shadow fleet’ of tankers, somewhere between 600 [1] to 1,400 [2] vessels.

Attacks against shipping in Middle East waters have also severely impacted Suez Canal transits – down by more than 40% [3]at the beginning of 2024 – and trade. Coming so soon after the ongoing disruption caused by drought in the Panama Canal, this amounts to a double strike on shipping, causing yet more issues for global supply chains. Whichever alternative routes vessels take, they face lengthy diversions and increased costs, also impacting their customers. Avoiding the Suez Canal adds at least 3,000 nautical miles (over 5,500km) and 10 days sailing time, rerouting via the Cape of Good Hope. [4]

Rerouting also impacts the risk landscape and the environment. Storms and rough seas can be more challenging for smaller vessels used to sailing coastal waters, while infrastructure to support an incident involving the largest vessels, such as a suitable port of refuge or a sophisticated salvage operation may not be available. Environmental gains may be lost as rerouted vessels increase speeds to cover longer distances. Red Sea diversions are already cited as being a primary contributor to a 14% surge in emissions [5] in the EU shipping sector this year.

Shipping contributes around 3% of global emissions [6] caused by human activities and the industry is committed to tough targets to cut these. Reaching these targets will require a mix of strategies, including measures to improve energy efficiency, the adoption of alternative fuels, innovative ship design, and methods of propulsion.

Decarbonization presents various challenges for an industry juggling new technologies alongside existing ways of working. For example, the industry will need to develop infrastructure to support vessels using alternative fuels, such as bunkering and maintenance, while at the same time phasing out fossil fuels. There are also potential safety issues with terminal operators and vessels’ crew handling alternative fuels that can be toxic or highly explosive.

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Source: Allianz