Record low shipping losses amid rising sector risks

Maritime safety is paramount, with up to 90% of global trade traversing oceans. Three decades ago, the international shipping industry experienced the loss of around 200 large vessels annually.

 

However, this figure dramatically dropped to a historic low of 26 in 2023, marking a year-on-year decrease of over one-third and a 70% decline over the past decade. Despite these advancements, the sector faces escalating volatility and uncertainties due to factors like geopolitical tensions, the impacts of climate change, and ongoing risks associated with the trend toward larger vessels.

 

Allianz Commercial's Safety and Shipping Review 2024 underscores the challenges ahead, emphasizing the need for sustained efforts to maintain this positive trajectory.

 

“The speed and extent of the way the industry’s risk profile is changing is unprecedented in modern times. Conflicts such as in Gaza and Ukraine are reshaping global shipping, impacting crew and vessel safety, supply chains and infrastructure, and even the environment. Piracy is on the rise, with a worrying re-emergence off the Horn of Africa. The ongoing disruption caused by drought in the Panama Canal shows how the changing climate is affecting shipping, all at a time when it is having to undertake its most significant challenge, decarbonization,” stated Captain Rahul Khanna, global head of Marine Risk Consulting at Allianz Commercial.

 

In 2023, there were 26 total losses reported globally, a decrease from 41 the previous year. Over the past decade, there have been 729 total losses reported. The maritime region encompassing South China, Indochina, Indonesia, and the Philippines emerged as the primary hotspot for losses, accounting for nearly a third of vessels lost last year and over the past decade (184). Cargo ships comprised more than 60% of vessels lost worldwide in 2023, with foundering being the leading cause of total losses, representing 50% of cases. Extreme weather played a role in at least 8 vessel losses globally in 2023, though the actual total is likely higher.

 

While the overall number of shipping incidents reported globally slightly decreased last year (2,951 compared to 3,036), the British Isles saw the highest number of incidents (695). Onboard fires, a persistent concern, also declined, but there were still 55 total losses in the past five years and over 200 fire incidents reported in 2023 alone (205) – the second-highest total for a decade, following 2022.

 

Fires remain a critical safety issue, especially on larger vessels, posing threats to life, causing extensive damage, and incurring substantial associated costs, contributing to the long-term rise in the cost of large marine insurance claims.

 

Recent incidents, including those following the conflict in Gaza, have highlighted the growing vulnerability of global shipping to proxy wars, disputes, and geopolitical events. Over 100 ships in the Red Sea have been targeted by Houthi militants in response to the conflict. Disruption to shipping in this region has persisted and is likely to continue for the foreseeable future. Additionally, the re-emergence of Somali pirates, marked by their first successful hijacking since 2017, is a further cause for concern.

 

"Both the war in Ukraine and the Red Sea attacks have also revealed the increasing threat to commercial shipping posed by new technology, such as drones, which are relatively cheap and easy to make, and difficult to defend against without a large naval presence," stated Khanna.

 

He further added "Looking to the future, more techologically driven attacks against shipping and ports are also a distinct possibility. Reports of vessels experiencing GPS interference are increasing, particularly in the Strait of Hormuz, the Mediterranean, and the Black Sea."

 

Moreover, attacks on shipping in Middle Eastern waters have significantly impacted Suez Canal transits, which dropped by more than 40% at the beginning of 2024, severely disrupting trade. This follows the ongoing issues caused by drought in the Panama Canal, creating a double blow to the shipping industry and further straining global supply chains.

 

Vessels rerouting to avoid the Suez Canal face lengthy diversions and increased costs, affecting their customers as well. Avoiding the Suez Canal by rerouting via the Cape of Good Hope adds at least 3,000 nautical miles (over 5,500 km) and 10 days of sailing time.

 

These diversions also affect the risk landscape and environmental considerations. Smaller vessels, accustomed to coastal waters, may struggle with storms and rough seas, while infrastructure for handling incidents involving the largest vessels, such as suitable ports of refuge or advanced salvage operations, may be lacking.

 

Environmental benefits may be negated as rerouted vessels increase speeds to cover the longer distances. Red Sea diversions are already cited as a primary contributor to a 14% increase in emissions in the EU shipping sector this year.

 

Shipping contributes approximately 3% of global emissions from human activities, and the industry is committed to ambitious targets for reducing these emissions. Achieving these goals will require a combination of strategies, including enhancing energy efficiency, adopting alternative fuels, and implementing innovative ship designs and propulsion methods.

 

Decarbonization presents numerous challenges for an industry that must integrate new technologies with traditional practices. For instance, the industry will need to develop infrastructure to support vessels using alternative fuels, such as bunkering and maintenance facilities, while simultaneously phasing out fossil fuels. Additionally, there are potential safety concerns for terminal operators and vessel crews handling alternative fuels, which can be toxic or highly explosive.

 

"Increasing shipyard capacity will also be key as the demand for green ships accelerates. Such capacity is currently constrained by long waiting times and high building prices. Over 3,500 ships must be built or refitted annually until 2050, yet the number of shipyards more than halved between 2007 and 2022. Capacity constraints on shipyards could have a knock-on effect for repairs and maintenance, with damaged vessels or those with machinery issues potentially facing long delays,” stated Justus Heinrich, global product leader, Marine Hull, Allianz Commercial.

 

Shenzhen Xunlaitong specializes in shipping export from Shenzhen to Australia & New Zealand, Germany, Netherlands and more business

 

www.xunlaitong.com