What's ship-shape and Bristol fashion in ocean shipping has become an ever-rising risk factor
 Poor quality tonnage, poor operational quality and a history of incidents can generate a broad range of risks and impacts for traders that can result in significant damage.
So runs the warning from RightShip of Melbourne, that has done work checking out ships in the vast fleet of Minnesota food giant Cargill.
In an article in Hellenic Shipping News Worldwide, Rightship warns of the perils both nautical and regulatory, of not being ship shape when one sets sail.
Taking two vessels as an example, RightShip says they were both flagged, classed and insured. "Yet the gap in quality between the two vessels – and therefore the difference in risk – was vast," said the article.
The range of risks is broad, it says, from simple reduced maintenance, which can limit the performance capability of vessels to unplanned machinery breakdown and stoppages, which can lead to a loss of life. To which is added significant supply chain disruption, groundings, fires, explosions and other significant events, which can result in serious environmental impact.
"The resulting potential impact on a trader range from the inconvenient to severe: from delays, performance claims and missed deadlines to breach of contract sale and purchase, damage loss of cargo, significant pecuniary costs and reputational damage," the article said..
RightShip also points to new ESG (environment, social, governance) risks for which one can be blamed, as well as global warming emission crimes against humanity with the introduction of new supply chain social due diligence legislation.
The frequency of these incidents can surprise those not well-versed in maritime risk: RightShip data shows that 10.4 per cent of vessels face some sort of detention at ports and terminals, where the average duration of detention is 5.4 days.
"These detentions can be the result of hull and machinery damage, which accounts for nearly 18 per cent of all incidents recorded and disruption or operational incidents have the potential to cause significant impact on the broader supply chain – as we saw in an extreme example with the Ever Given in the Suez Canal."
"RightShip’s vision is a zero-harm maritime industry. Over 22 years, we have helped charterers and traders gain greater assurance of the vessels used in their supply chain activities through, inter alia, due diligence processes that go beyond basic compliance with statutory and regulatory requirements.
What is offered is a RightShip Vessel Trade Check used by traders, trade finance institutions, and insurers, to gain an instant evaluation of a vessel against due diligence criteria that exceed regulatory requirements.
The vessel trade check include checks on recent incidents and incident performance, port state control detention and deficiency activity and status, sanctions breaches, ILO or ITF open abandonment cases and other critical factors.
If conditions indicate a potential risk with a vessel, traders can perform more thorough due diligence with a full vetting process. This can be managed by RightShip’s vetting and operations teams and includes additional criteria such as evaluation of Class Survey Status reports, and incidents reports for suitable potential risks for traders.
Among them is the increasing age of the global fleet. This trend is driven by a number of factors, including hesitancy to order new vessels while new technologies are being developed.
An increase in vessel value is associated with prolonged operational lifetimes. Volatile market conditions can also impact the maintenance regimes of ships, reducing the quality and reliability of assets as vessels can be traded harder in bullish markets and maintained more conservatively in bearish markets.
In addition to these factors, Covid changed the reality of shipping. During 2020 and 2021, seafarers kept global trade moving. They were not, however, properly recognised as key workers and “no crew change” clauses combined with local port and global travel restrictions restricted the ability to repatriate crew.
This resulted in many seafarers serving well in excess of 12 months on board vessels without relief. Travel restrictions during the pandemic also limited the ability of shore staff and third-party organisations to undertake routine inspections.
A number of shipowners found the cost of maintaining their vessels was too great, so they opted to abandon them and their crews without any further consideration.
As such, 2022 saw the highest number of seafarer abandonment cases ever recorded. These problems have been further compounded by the ongoing Russo-Ukrainian War, and many experienced seafarers are leaving the industry as a result. This increases the workload on remaining crews, giving rise to a greater risk of incidents, and threatening the continuity of the industry.
This is at a time when the industry needs an influx of talent to meet industry demand, manage risks from new fuels and technologies, and maintain pace with a rapidly changing world.
This picture of heightened risk is reflected in the data from incidents and port state control deficiencies and detentions which show an observable increase.
Last year, 4,604 incidents were registered by RightShip, with dry bulk vessels, cargo vessels, and chemical tankers having the highest incident numbers. Incidents occurred on young and old vessels, with 46 incidents in the past two years occurring on vessels only one-year-old. Of these 46, 25 per cent were Category B, the second-most severe kind of incident, which includes injury, significant vessel damage, severe structural damage, explosion, fire, flooding etc.
Within these 4,604 incidents, 193 lives were lost, 113 crew members reported missing, and 86 seafarers suffered serious injuries. Time is a critical factor for most traders, which means important decisions on vessels can be made with very limited information at hand.
Ships can often be chosen based on their compliance with minimum requirements such as being registered under a flag state, classified by a classification society, and adequately insured. Some operators might also prefer newer ships.
However, these criteria only provide a very narrow perspective of a ship’s associated risks.
Ninety per cent of world trade – from bulk raw commodities to breakbulk and finished goods – is moved on 60,000 ships,and crewed by 1.5 million seafarers. To most traders, the potential risks associated with any one of these vessels is an unknown. But to ensure that the ships meet an acceptable standard, they must be evaluated for supply chain service, with potential risks associated with ocean-going ships assessed and minimised and mitigated. |
