Opinion Piece: Brought to you by Lars Greiner, Associate Partner at HPC Hamburg Port Consulting GmbH
“If Shipping is the blood of world trade then the blockage of the Suez canal by the MV ‘Ever Given’ has given trade a heart attack, and we are only now starting to understand the effects and costs that are likely to be with us for a long time.
Make no mistake, this has happened at a time that could not be worse for international trade. Companies are already struggling under the burden of reduced or changed businesses due to Covid, and the same pandemic has caused real chaos, with the international cargo flows severely disrupted and container flows disrupted leading to times of severe deficit in some areas, where containers are needed for export and severe terminal congestion, in major import terminals. Shipping lines are struggling to manage this ebb and flow, and now they have been thrown another challenge on top.
I really hope the vessel is freed as soon as possible, and the lines will manage the flows. There may be some shortages of some goods in some areas, and there may be some disruptions to manufacturing. In a Breakbulk and project sense, there may be some items delayed a couple of weeks, but overall, the shipping companies will deal with it, and most goods will arrive. The major cargo damage will be reefer cargo on the vessels currently held up or near Suez. This in itself will be millions of dollars of damage, and there will no doubt be some shortages of exotic Asian and Australasian fruits in Europe and European fruits and berries in Asia.
The real costs and ones that interest me will however be unseen and come later.
This is a clear case of General Average (GA), and possibly the biggest general average in liner shipping history, something that my law professor once commented that a worst-case scenario that would test the very structure of the general average rules would be a mega-carrier fully laden, and that was when the so-called mega carriers were topping out at around 13000 TEU, now we are looking at something 65 percent bigger! And to add to this, the salvage is in a key location with multiple and complex salvage requirements. Not only is it an extremely expensive salvage, and getting more, but also there are literally potentially dozens of parties and claimants to a general average process, and the first task will simply be trying to identify and verify all of them. I am no expert on GA, but I am pretty sure that just that process, as well as receiving all the claims from cargo owners and those involved in the salvage will be an extremely complex, costly, and time-consuming task. It will take years, if not decades. It will challenge and test the legal system around ship claims and potentially require some changes in it, but I suppose in a time where everything is changing, it is right that this too should be reconsidered, but for now, am looking forward to learning more and watching the process, as sad as the current circumstances may be.”
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