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Ocean Freight Supply Chains

Ocean Freight Supply Chains Less Secured This Year

The 4th yearly Safety & Shipping Review for 2016 by the Allianz Global Corporate and Specialty, AGCS, that studies shipping losses over hundred gross tons, said that the losses in shipping services are still on the long-term downtrend with 85 losses totally reported globally in the year 2015.

Though there was a stability in the loss figures, falling only by 3% in comparison to previous year’s figure of 88, yet 2015 remained the most secure and safest year for shipping in the last decade. Losses had a 45% decline since the year 2006, a result of a continuously growing robust secure environment.

Fishing and cargo vessels gave an account of 60% or more ships lost all over the world, with cargo freight losses rising for the very 1st time in last three years. A primary cause for the losses is sinking/foundering, which accounts for around 75% of the total losses, often because of bad weather conditions.

The report made other observations like regional comparisons, cyber risk, ship sinking by superstorms, salvage issues and economic observations, as described below:

It said that in 2015, there were 2,687 reported incidents of cargo shipping, 4% down. Out of all the losses for the year 2015, more than one quarter took place in Indochina, South China, Philippines and Indonesia with 22 ships. The losses increased YOY, unlike other important regions. Two losses were reported from North America’s west coast and the United States eastern seaboard, each, for the year 2015.

Elaborating upon cyber threat, the report said that risks occur as the freight shipping world and industry is dependent upon interconnected technology. No. of cyber incidents as well as technological advances have occurred, so the industry possibly does not have many years to be ready for vessel loss risks. In 2015, like never before in 5 years, privacy attacks did not decline. South-East Asian attacks increased as they accounted for 60% incidents of all, while piracy attacks taking place in Vietnam increased YOY.

Moreover, the report said, risks and disruptions for supply chains are on an increase with the exceptional events of the weather becoming common. This year, extreme conditions of the weather will increase most likely under the El Nino’s effect. In the previous year, bad weather condition was a reason behind 3 vessels of the 5 largest ones lost, including El Faro.

The Worldwide Product Leader Marine & Hull Liabilities for AGCS, Sven Gerhard said that cargo ships sinking due to superstorms is concerning, adding that they are seeing heavier disastrous events and thus weather routing is an important component for a safe navigation and travel of vessels.

The report, talking about salvage issues of “mega ships”, said that in the last decade, with the increase in appetite for larger shipping containers, the freight-carrying capacity for large vessels also rose by 70% to more than 19,000 containers. In February this year, 2 “mega ships”, APL Vanda and the CSCL Indian Ocean were grounded, which raised questions regarding serious incidents.

The report added that the downtrend has also been affected by the weak market conditions and economy and low commodity prices. Many sectors including the general cargo freight, offshore and bulk, are challenged already and any fall in standards of safety will be a concerning case, said Captain Rahul Khanna, Worldwide Head, Marine Risk Consulting department of AGCS.