Insurance claims on the rise with box ships forced to brave Cape weather
There has been a prolific rise in weather-related cargo loss and insurance claims since carriers ...
DSV: STAR OF THE WEEKDSV: FLAWLESS EXECUTIONKNIN: ANOTHER LOWWTC: TAKING PROFITMAERSK: HAMMEREDZIM: PAINFUL END OF STRIKE STLA: PAYOUT RISKAMZN: GOING NOWHEREAMZN: SEASONAL PEAK PREPARATIONSJBHT: LVL PARTNERSHIPHD: MACRO READING AND DISCONNECTSTLA: 'FALLING LEAVES'STLA: THE STEEP DROP
DSV: STAR OF THE WEEKDSV: FLAWLESS EXECUTIONKNIN: ANOTHER LOWWTC: TAKING PROFITMAERSK: HAMMEREDZIM: PAINFUL END OF STRIKE STLA: PAYOUT RISKAMZN: GOING NOWHEREAMZN: SEASONAL PEAK PREPARATIONSJBHT: LVL PARTNERSHIPHD: MACRO READING AND DISCONNECTSTLA: 'FALLING LEAVES'STLA: THE STEEP DROP
As well as taking longer, voyages around the Cape of Good Hope mean burning more fuel and emitting more carbon, but cargo research specialist MSI believes carriers are enjoying “disproportionate revenue increases”.
The Loadstar’s Mike Wackett has reported on the enormous recent hikes in $/feu rates – for example, Drewry’s World Container Index (WCI) on Shanghai-Rotterdam increased from $1,442/feu in mid-December, to $3,577 last week.
MSI container market analyst Daniel Richards told The Loadstar that for now the changes could be explained by the fact that shippers were paying for uncertainty – but he would expect to see rates normalising, should Cape transits become a longer-term norm.
“In the very near term, it’s likely that the additional costs from some of these earlier diversions are going to be higher because those vessels were out of position,” he said. “If this were to become a permanent shift, certainly Asia-Europe freight rates of $3,000, $4,000/feu do not reflect the uplift in costs.
But he added: “There is definitely a risk premium element. In the run-up to the Chinese New Year, people want to make sure they are going to secure space on ships and secure the equipment they need.”
MSI’s findings also point to inconsistencies in the IMO’s CII regulation, which came into force on 1 January and provides a perverse incentive for vessels to travel around the Cape.
Spending more time underway and less in port, a typical 15,000 teu containership going from Asia to Europe via the Cape would be 1.6gCO2/Dwt per NM better off than one travelling via the Suez Canal, despite burning more fuel in exchange for less useful work.
“For this voyage, [a ship’s] CII score would be better because it is spending more time at sea and, all else being equal, that will boost your CII score,” said Mr Richards.
This is despite the fact that, according to SeaRoutes data, a ship on the Cape route burns 21.5% more fuel, with a concomitant increase in carbon emissions, than one going via the Suez Canal. Calculated on distance only, this ignores the considerable effect of sailing against the wind, which blows eastward at Cape latitudes, he added.
Only the EU Emissions Trading System (ETS), characterised by many in the shipping industry as unwelcome regulatory overreach, accounts for the difference, levying an additional €75,000 ($82,000) for a 15,000 teu box ship transiting the Cape.
“On their own, the diversions around the Cape don’t justify adding on $2,000 a box,” said Mr Richards. “If you’ve been quoted for a surcharge or additional cost, do the homework to see if the numbers actually add up.
“But bear in mind that in the very near term there are going to be other sources of disruption to consider.”
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