9.1 C
London
Thursday, April 22, 2021

Cleaning up the Suez Canal took days. Understanding the costs can take years.

Must read

UK Time Newshttps://www.uktimenews.com
UK Time News is your daily dose of Latest News, Entertainment, Music, Fashion, Lifestyle, World, Cricket, Sports, Politics, Tech, Business News Website. We provide you with the Latest Breaking News Straight from the UK & all around the World on different categories.

TOKYO – It took six days to reward a giant container ship that ran aground and clogged the Suez Canal, one of the world’s most crucial shipping arteries. It could take years to figure out who will pay for the mess.

Freight companies, insurers, government authorities and a phalanx of lawyers, all with different agendas and potential valuations, will need to not only determine the total damage, but also what went wrong. When they’re done digging in the swamp, the ship’s Japanese owner’s insurers will likely suffer the brunt of the financial pain.

The costs could add up quickly.

There are repairs for any physical damage to the Ever Given, the quarter mile long ship that got stuck in the Suez. There is the bill from the tugs and front loaders who pulled the stranded vessel out of the mud. The authority that manages the Suez Canal has previously said the crisis has cost the Egyptian government up to $ 90 million, for lost toll revenue as hundreds of ships waited to cross the blocked waterway.

And the broken-down ship has withheld up to $ 10 billion in cargo a day to cross the canal, including cars, oil, livestock, laptops, sneakers, electronics and toilet paper. Companies that deliver goods may have to pay customers for missed deadlines. If agricultural products have gone wrong, producers may seek to recoup the lost income.

All of these cascading effects could represent insurance claims worth several hundred million dollars, as well as greater losses due to delays in the global supply chain.

The financial mess will trap a multinational network of companies, led by the ship’s Japanese owner, its Taiwanese operator and the German managing agent who hired the crew, as well as a myriad of freight companies who have hired leased cargo. space in the ship’s containers and a large pool. insurance companies stretching from Tokyo to London.

READ  “It was murder in broad daylight,” President Biden said of George Floyd's death.
READ  Banning greyhound racing is the only answer, say animal welfare advocates

The ultimate liability may lie with the insurers of the ship’s owner, Shoei Kisen Kaisha Ltd., a subsidiary of the 120-year-old Japanese shipbuilder Imabari.

Teams from the German company that hired the crew and a consortium of insurers for the shipowner are just beginning to investigate the causes of the abandonment of the Ever Given. Authorities in Panama, where the vessel is registered, are also investigating, as are investigators of other interested parties. Their findings, whether they agree or not, will complicate questions of liability, occupying adjusters and lawyers for years as they sort the finger.

Investigators want to know “who was responsible for the disturbance – was it the crew, the pilots working for the Suez Canal Authority, or is it just an act of nature or an abnormal wind-blown accident?” said Richard Oloruntoba, associate professor of supply chain management at Curtin Business School in Perth, Australia.

Even after the investigations are completed, Oloruntoba added, “it’s not clear. It all depends on the quality of the lawyers and the contracts that have been concluded. “

The simplest aspect is the damage to the ship and the canal. In the shipping industry, these costs are generally borne by the shipowner’s insurers, in this case a consortium led by Mitsui Sumitomo Insurance in Tokyo with Tokio Marine and Sompo Japan. Initial reports indicate that the vessel did not suffer much damage and that there was no pollution leak.

The consortium is also likely to be on the hook for rescue costs to free the ship, which have swelled as experts and equipment have been mobilized on short notice. Robert Mazzuoli, insurance analyst at Fitch Ratings, estimated that the bill could run into the tens of millions, although there are many variables.

READ  Dominion Voting Systems Sues Fox News for $ 1.6 Billion Over Fake Election Statements | UKTN News

The most delicate piece of the puzzle is the cargo. The companies that booked containers on Ever Given, as well as some of the 400 ships that had to queue outside the canal while blocked, may want to file complaints.

But most insurance policies do not cover economic losses related to cargo delays. Companies will therefore have to explain why they are entitled to compensation.

READ  Dominion Voting Systems Sues Fox News for $ 1.6 Billion Over Fake Election Statements | UKTN News

Such claims could run into the hundreds of millions of dollars.

Ships carrying the most urgent cargoes, such as livestock or produce, might present the strongest argument. These ships, however, were allowed to go first once the waterway was cleared.

In most cases, freight claims could be “unworkable,” said Jeff NK Lee, a Taipei lawyer specializing in commercial and transportation law.

“While the ship is just parked there, the cargo is not really damaged,” Mr. Lee said. “The only pity is that it’s delayed.”

“Let’s say I have a batch of fabric, and on top of the time it took to get to Taiwan, it got stuck for six or seven days,” he said. “He just stayed there. Is it going badly? This will not be the case.

There is a caveat. The shipowner could have to pay for cargo delays, if his crew is found to be responsible for the accident.

Certain so-called third-party claims related to delayed shipments may be covered by another insurer for the vessel, the UK P&I Club. The same goes for any claim from the Suez Canal Authority, which operates the waterway and could file a possible loss of revenue.

READ  Experts explain the power of UKTN' petition to IMF

Nick Shaw, managing director of the International Group of Protection and Compensation Clubs, the umbrella group that includes the UK P&I Club, said the insurer “would make decisions with the shipowner as to which ones were valid and which ones. are illegitimate ”.

Adding to the complexity of the Suez accident are the layers upon layers of insurance. Reinsurers, companies that cover the risk of other insurance companies, come into play for claims over $ 100 million. Between insurance and reinsurance, the shipowner has coverage for these third party claims of up to $ 3.1 billion, although few experts believe the damage will be that high.

The sheer size of Ever Given makes the situation all the more labyrinthine. Wartime aside, the Suez Canal has never been blocked as spectacularly or for as long as it was with Ever Given, and it is the largest ship to run aground.

The ship is as long as the Empire State Building is tall, with the capacity to carry 20,000 containers stacked 12 to 14 high. The Ever Given is part of a fleet of 13 in a series designed by Imabari, as part of a drive to reduce costs per container and make ships more competitive in an increasingly fierce market dominated by Chinese and South Korean shipbuilders.

READ  Stanford dominates Arizona 54-53 to win NCAA Women's Tournament

“The bigger the ships the risk is that every time you have an incident like this you put more eggs in one basket,” said Simon Heaney, senior director of container research at Drewry UK, a shipping consultancy firm. “The claims will therefore grow.”

Raymond zhong and Amy Chang Dog contributed reporting from Taipei, Taiwan. Vivian Yee contributed from Cairo and Makiko Inoue, Hisako Ueno, Hikari Hida from Tokyo.

More articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

15,129FansLike
4,596FollowersFollow

Latest article