Suez Canal Blockage, Exercises of Design

Download Suez Canal Blockage and more Exercises Design in PDF only on Docsity! 4 Suez Canal Blockage Heinz Gohlish and Michael Moon On 23 March 2021, the ultra-large container ship (UCC) Ever Given,' on a voyage from Tanjung Pelepas, Malaysia, to Rotterdam, was transiting the Suez Canal northbound, running fifth in a convoy of 20 ships. Shortly after enter- ing, the ship experienced significant crosswinds due to a desert storm and became diagonally wedged across the canal. She grounded both at the bow and the stern. The canal was immediately blocked in both directions and over 200 ships transiting or about to enter the canal were stopped until the blockage was cleared. The queue grew by about 50 ships per day. The Suez Canal Authority (SCA) immediately dispatched tugs and dredgers to the scene to push the ship back into the central channel. This proved more difficult than an- ticipated. The tide was of some assistance but the range is small, about half a metre (18 inches). Combined efforts in dredging the canal banks where the ship was lodged and tugs pulling/pushing at both ends at high tide finally freed the ship on 29 March after six days of blockage. Ever Given was then escorted to the Great Bitter Lakes where she was anchored until the SCA finally allowed the vessel to leave on 7 July, 108 days after entering. With further hull checks off Suez, Ever Given finally con- tinued with her voyage but would not complete the origi- nal planned rotation of discharge ports. Factors includ- ed the convenience of those still waiting to receive their cargo, and concerns that some of them, or their insurers, would seek to initiate legal proceedings aimed at detain- ing the vessel in order to obtain security for their late delivery claims. However, that did not happen. The ship proceeded directly to Rotterdam to discharge some cargo, then to Felixstowe, UK, where all remaining containers were discharged or transhipped. Ever Given then contin- ued to Quingdao, China (via the Suez Canal, this time ac- companied by two tugs) for drydocking, thus completing the round voyage.” Future developments are now in the hands of insurers and their lawyers, negotiating in accordance with the ap- plicable maritime conventions and laws, the outcome of which will cost the affected parties millions of dollars. In addition, this incident put the spotlight on three key maritime issues: (1) world-wide commercial trade choke points; (2) ship design; and (3) the fragility of the global supply chain. As maritime incidents go, this one was not particularly unusual. What made it noteworthy is twofold: (1) the im- mediate impact the blockage had on the global supply chain; and (2) the scale of this impact. Indeed, a single CANADIAN NAVAL REVIEW = VOLUME 17, NUMBER 2 (2021) ¥ } | | Credit: NASA, photo ID ISS064-E-48480 An image taken from the International Space Station on 27 March 2021 shows the container ship Ever Given stuck in the Suez Canal. ship involved in a single incident set into motion a series of events that will take months - more likely years - to play out, and involve costs possibly running into hun- dreds of millions of dollars before the books can finally be closed. This should concern policy-makers and strategic planners on several levels. This article will outline how this scenario came about and identify the ramifications that may affect future maritime policy issues. The Main Actors The Suez Canal Authority (SCA): The Suez Canal, be- tween the Mediterranean and Red Seas,’ was opened in 1869 and became the crucial maritime link between the Far East and Europe. Since the Suez Crisis in 1957, the canal is sovereign property of Egypt which discharges its management responsibilities through the SCA, a “public and an independent authority of juristic personality. The canal is 193 kilometres (120 miles) long with two passing areas ~ the Great Bitter Lakes and El Ballah. The maxi- mum allowed ship’s beam is 77.5 metres (252 feet) and the maximum depth is 24 metres (78 ft) with a maximum al- lowed draught of 20.1 metres (66 ft).° Ships transit in con- voy in one direction ata time. In 2019 about 12-15% of the world’s seaborne trade and 30% of the world’s shipping containers passed through the canal. It is compulsory for all transiting ships to embark an SCA pilot. However, the pilot acts in an advisory capacity only and the responsibil- ity for safe navigation in the canal remains with the Mas- ter of the ship. The canal has been closed before and there have been ear- lier groundings. The most serious impediment was fol- lowing the Six Day War when the waterway was closed from 1967-75. The effects of this lengthy closure were disruptive, most seriously for tankers, but the shipping industry adjusted without too many problems. The con- tainer industry was then still in its early stages and the supply chain as we know it today barely existed. The ship operators: There are three principal ship opera- tors involved in this incident and their interlocking re- lationship is standard for the shipping industry. The ul- timate owner of Ever Given is Shoei Kisen KK (SKK) of Imabari-shi, Japan. It exercises its ownership though a subsidiary company Luster Maritime SA/Higaki Sangyo Kaisha Ltd. SKK owns over 150 ships of varying types and is itself a wholly owned subsidiary of Imabari Zosen KK, a major shipbuilder. The day-to-day management of the ship - crew and technical - is subcontracted to Bernhard Schulte HKG LP of Hong Kong, which is a subsidiary of The Bernhard Schulte Group of Hamburg. Their relation with the owners is governed by a management contract.° The final key participant is the ship charterer - in this case Evergreen Marine Corp. Ltd of Taiwan, which oper- ates hundreds of owned and chartered ships. The char- terer’s contract with the ship owner is found in the char- ter party. In this case, it was a time charter and therefore the responsibility for the operation and navigation of the ship remains with the owner. The time charterer’s prima- ry responsibility is the employment of the ship. That is, the charterer arranges the cargo, loads the ship, directs the ship to its destination(s) and delivers the cargo to the receiver(s). The time charterers do not own the cargo but transports it under their care, custody and control. The governing doc- ument for this is the Bill of Lading (B/L) which contains the terms of the contract between the shipper and the car- rier. Evergreen, which is likely to have procured much of Ever Given arrives in Rotterdam in the early morning of 29 July 2021 after its grounding in the Suez Canal. the cargo for the vessel, will have issued each of its shipper customers with a B/L identifying itself as the carrier of the cargo. Evergreen is likely also to have chartered space out on the vessel to the pool partners with whom it is en- gaged in providing the joint service. Those partners will issue their own Bs/L to their shipper customers. A space charter agreed among the pool partners will address who between them will pick up the liabilities following an in- cident, once they have each paid their customer claims. Following an incident, it becomes the responsibility of the relevant liability insurers to disentangle this web of con- tractual and legal obligations and ultimately to pay for it. This is conducted in accordance with the local jurisdiction (Egypt), the jurisdiction of the relevant B/L contracts and in accordance with applicable international conventions which are most likely incorporated into the contracts or through accession to the relevant conventions by Egypt or the flag state (Panama). The liability insurers: There are four key parties whose li- ability insurers will determine who is to be compensated, the level of compensation and who ultimately pays: the SCA; Shoei KK; Evergreen; and the various cargo inter- ests. The SCA will likely escape liability unless it can be proven that the incident was caused, at least in part, by the authority’s negligence (eg., failure to maintain advertised depth). SKK and Evergreen, for their part, will rely on their re- spective P&I Club - third party insurers for ship owners/ charterers, who indemnify their members for contractual and legal liabilities in the operation of their ships. For SKK this is the UK Club based in London, and for Ev- ergreen this is the Gard Club based in Arendal, Norway. The UK Club has already appointed a leading maritime Jaw firm to work with its in-house legal team. The various cargo interests are less concerned about liabilities (they have none), but are very concerned about cargo damage and delay. Their insurers will be scattered world-wide. VOLUME 17, NUMBER 2 (2021) CANADIAN NAVAL REVIEW ets gs oé g& eo go =e et £d Ss 5 8 cargo in accordance with contracts - and there will be thousands. The Suez Canal itself has become a claimant with an es- timated loss of revenue of $60 million (US), although a good part of that will have been recovered when the con- gestion cleared, as well as considerable salvage and dredg- ing expenses. SCA prevented the ship from leaving the canal by reportedly’? seeking compensation of $916 mil- lion from the ship owner. It was reported that this was later reduced to $550m. An agreement was reached 4 July although the total compensation is not known as the SCA. signed a non-disclosure agreement with the owners. There are two further important issues: cargo on board. Ever Given; and cargo on board all the other ships which were denied a timely passage. A rough estimate of the val- ue of the cargo within the 18,000 containers on board Ever Given is $775 million (US)." The latter group could be as many as 400 ships. This includes those ship owners who attempted to cut their losses and diverted around A frica, involving both additional fuel costs and adding about 10 days (at 20 knots) to the voyage time. Thousands of car- go owners now face contractual issues with hundreds of thousand of customers. The value of all this cargo could top out at $60 billion.’ Of course, most of this cargo will eventually be delivered without consequence, but a signif- icant proportion will be time sensitive - mainly refriger- ated cargo, seasonal products and just-in-time industrial inputs. The modern supply chain is unforgiving. Finally, there is the matter of ship design and available sea room. These huge ships regularly pass through three congested and shallow shipping choke points: the Strait of Malacca (average depth 25m); the Panama Canal (15.5m); and the Suez Canal (20.1m). Such shortcuts suit the ship operators and save time and fuel costs. They also suit en- vironmentalists and those invested in the global supply chain. However, there is a cost. CMA CGM Theodore Roosevelt, a 1,200-foot long container ship, passes under the recently elevated Bayonne Bridge connecting New Jersey and New York on its maiden voyage to the United States in September 2017. Theodore Roosevelt was the first large capacity container ship to transit under the bridge after the project to raise the bridge was complete. CANADIAN NAVAL REVIEW — VOLUME 17, NUMBER 2 (2021) Mote elon nd Pruett XY SS aE Two LNG-powered containerships of the French shipping lin There are some key issues which will likely feature in the formal investigations and in the legal proceedings among the various affected parties: 1. Suez Canal: The point may have been reached where this canal is no longer adequate for the size of ships now being built. A second, parallel channel extend- ing end to end is becoming a necessity, complete with cross-over channels to avoid future blockage. The SCA should also review its policy of routing the deep draught mega-carriers in convoys. Perhaps they should travel independently with tugs attached forward and aft. Such ships need the ability to proceed dead slow in shallow water. 2. Ship design: If, however, the mega-carriers are de- signed to navigate through narrow and shallow pas- sages, they should be built for greater independent ma- noeuvrability. Ideally, this means at least two engines and two propellers. 3. Maritime choke points: If the above come with an un- acceptable cost, consideration should be given to re- ducing the maximum size of future UCCs or, for large UCCs, increasing the length of the global supply chain. It is difficult to underestimate the financial fallout of an incident of this magnitude. The insurance and legal rami- fications will take years to resolve as the interested parties, their insurers and lawyers tussle over who should bear the consequential losses. What is clear is that the shipping and insurance industry have been taught a salutary lesson, and will be pondering long and hard the wisdom of operating and insuring ships of such magnitude, particularly when proceeding in confined and congested waters. OMA CGM are pictured here during trials in China in July 2021. Note the single propeller arrangement, which may reduce manoeuvrability at low speeds, increasing the risk of situations like that experienced by Ever Given Notes 1 4, 5. 6. . For propulsion, the ship has a s . ‘Shallow water effect,’ . The ship itself i Ever Given was built 2018; 219,079 gt, 199,489 dwt, 400m long, 59m beam, 16.5m max. draught, capacity 20,388 teu; Flag Panama; Class ABS. Sources: asis.org, marinetraffic.com, vesseltracker.com. ETA is 17 September. See www.vesseltracker.com. ‘The difference in water level between the two seas is measured in centime- tres, with a slight flow in both directions depending on the season. There are no locks in this canal. Suez Canal Authority, available at www.suezcanal.goveg. Ibid. Electronic Quality Shipping Information System, available at www.equa- s.0rg. Known as ‘Rights of Subrogation’ ‘The purpose-built container ships of this era had a capacity of just over 1,000 teu. ‘The next batch, due for delivery 20 i.e., 12,000 boxes measuring 40 x 8 x8 ingle diesel engine coupled to a single 3, will be in excess of 24,000 teu - fixed-pitch propeller. alled ‘squat effect’ in the UK, is explained by Ber- noulli’s principle and is particularly pronounced in a canal. It is reported that Ever Given’s draught during the canal transit was 15.6 metres (source: marine traffic.com). SWE could start at a depth/draught ratio of about 4. ‘The ratio here was about 1.5 at best (24/15.6). insured for $140 million by Hull & Machinery insurers, likely in the Japanese market, which does not involve the liability insurers. . As reported on BBC2, 6 July 2021. Ibid. Lloyd’s List estimated the daily build up of delayed ships collectively in- volves $9.5 billion of cargo. For an explanation of how P&I Clubs deal with such enormous compensation figures, see Heinz Gohlish, “Strategic Maritime Planning and the Role of P&I Clubs,” Canadian Naval Review, Vol. 13, No. 4 (2018), pp 18-19. Heinz Gohli worked for 33 Roem OLE for 13 years and ears in the City of London as a PeéI underwrite Ea ee ce Michael Moon is a retired solicitor with ove OMe MTR Om) Rea CLL mae ay VOLUME 17, NUMBER 2 (2021) Credit: CMA CGM CANADIAN NAVAL REVIEW 9