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The Ms Ever Given Casualty, Its Legal Consequenses and the Risky Logistics Behind the Suez Canal

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The Ms Ever Given Casualty, Its Legal Consequenses and the Risky Logistics Behind the Suez Canal 1 THE MS EVER GIVEN CASUALTY, ITS LEGAL CONSEQUENSES AND THE RISKY LOGISTICS BEHIND THE SUEZ CANAL InterTran research group Webinar, University of Helsinki 29 April 2021 Professor of Logistics Lauri Ojala, University of Turku [email protected] Turun kauppakorkeakoulu Turku School of Economics 2 About MS Ever Given and the incident Prof. Lauri Ojala on Container Shipping, 29 April 2021 MS Ever Given: key data 3 220,940 GT Tonnage: 99,155 NT 199,629 DWT Capacity: 20,124 TEU Displacement: 265,876 t Length: 399.9 m Beam: 58.8 m Crew: 25 The vessel was almost fully laden mainly with FEUs Owner (Japan): Shoei Kisen Kaisha 11,000+ boxes with goods from 50,000+ shippers onboard Operator (TWN): Evergreen Marine ~370 vessels carrying goods worth US$ 9bn, incl. 200,000+ Port of registry: Panama City (PAN) live animal queued on both sides of the grounded vessel* Source: Evergreen Line Prof. Lauri Ojala on Container Shipping, 29 April 2021 *Source: DHL Evergreen Line’s Statement regarding Ever Given 4 incident in the Suez Canal, issued 24 March 2021: “Evergreen Marine Corp. received a notice from the owner of EVER GIVEN that the chartered vessel ran aground in the Suez Canal at around 8 am local time on March 23. This accident occurred at 6 nautical miles from the southern entry of the Canal as the container ship proceeded northbound through the waterway from the Red Sea. Gusting winds of 30 knots caused the container ship to deviate from its course, suspectedly leading to the grounding.” Source: Evergreen Line & BBC Prof. Lauri Ojala on Container Shipping, 29 April 2021 5 A view on worldwide container shipping and global supply chains prior to the MS Ever Given incident Prof. Lauri Ojala on Container Shipping, 29 April 2021 17,500,000 17,000,000 16,500,000 16,000,000 15,500,000 15,000,000 14,500,000 14,000,000 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 06 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 /1 /1 1 2 2 2 2 2 2 2 2 2 2 /2 2 2 2 / / / / 9/ Worldwide7/ 4/ 2/ available9/ 6/ 4 container1 9/ shipping/ / / capacity,0/ 7/ M5/ TEU2/ 0/ 7/ 4/ 2 9/ 7/ / /7 /4 /4 /1 2 2 2 2 1 1 1 1 / /6 /3 /2 3 2 2 2 2 1 1 1 / / /4 1 2 3 4 / / / / / / 0/ 1/ 2 1 2 3 / / / / / / / 0/ 1 2 1 4 5 6 7 8 9 1 1 1 3 4 5 6 7 8 9 1 1 1 117,57,500,000 Sum of Trade Capacity Sum of Trade Capacity, 4 weeks rolling mean 117,07,000,000 Chinese N.Y. ) COVID-19 116,56,500,000 116,06,000,000 Million 225+ Million container boxes are In 2020, approx. 3,000 115,55,500,000 shipped p.a., with an avergage value container boxes were lost TEU ( TEU of USD 50,000/box* overboard* (~ USD 150 M) 115,05,000,000 As a result of the COVID-19 pandemic (and Chinese New Year), shipping lines dramatically reduced 114,54,500,000 capacity in Feb. and March 2020. In May 2020, capacity progressively ramped up to meet the demand. 114,04,000,000 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 /1 /1 1 2 2 2 2 2 2 2 2 2 2 /2 2 2 2 / / / / 9/ 7/ 4/ 2/ 9/ 6/ 4 1 9/ / / / 0/ 7/ 5/ 2/ 0/ 7/ 4/ 2 9/ 7/ / /7 /4 /4 /1 2 2 2 2 1 1 1 1 / /6 /3 /2 3 2 2 2 2 1 1 1 / / /4 11 2 33 4 5/ /6 / 7 / 8 / 9 / 100 / 111 / 122 11 22 33 4/ 5 / 6/ / 7 / 8 / 9 / 10 0 / 11 1 122 1 1 2 4 5 6 7 8 9 1 1 1 3 4 5 6 7 8 9 1 1 1 2019 Sum of Trade Capacity Sum of Trade Capacity, 4 weeks rolling mean2020 Source: World Bank Trade Watch Prof. Lauri Ojala on Container Shipping, 29 April 2021 * Source: Bloomberg Drewry World Container Index for spot freight rates, 7 22 Apr. 2020 – 22 Apr. 2021 in USD/FEU ) Note: The majority of container flows are based on longer term contracts and not directly affected by spot rate fluctuations. container All are subject to several freight ft adjustment factors on top of reference freights, which can more than double the freight cost. USD / FEU (40 (40 / FEU USD Source: Bolloré 2021 Prof. Lauri Ojala on Container Shipping, 29 April 2021 Shanghai Containerized Freight Index, examples of 8 weekly spot rates in USD, 18 Dec. 2009–9 Apr. 2021 COVID-19 TEU or USD / FEU USD MS Ever Given Prof. Lauri Ojala on Container Shipping, 29 April 2021 Source: UNCTAD 2021 EBIT = Market shares in 2020 and 9 earnings EBIT margins (%) Q1-Q4/2020 nd before Excl. 2 largest MSC*, ~15 % share interest M TEU Maersk 17,0 % 4,2 * *) 2M Alliance and CMA CGM 12,4 % 3,0 ** **) Ocean Alliance taxes COSCO 12,4 % 3,0 ** ***) THE Alliance Hapag-Lloyd 7,3 % 1,8 *** 1 ONE 6,6 % 1,6 *** 1) One Ocean Network: 'K' Line, MOL and NYK Evergreen 5,5 % 1,3 ** HMM (Hyundai) 3,1 % 0,8 *** Alliances are consortia of Yang Ming 2,6 % 0,6 *** carriers that have been ZIM 1,7 % 0,4 * allowed to operate as Wan Haj 1,5 % 0,4 such by e.g. EU, US & CHN In total 70,1 % 17,2 Source: DVZ 14.4.2021 Total market 24,5 based on Alphaliner Prof. Lauri Ojala on Container Shipping, 29 April 2021 Copyright logscale oy © 2019 10 Source: DHL 2021 EBIT % of the ten largest container lines 11 2008-2020 on average; Excl. 2nd largest MSC EU block exemption EU outlaws consortia liner extended conferences Share Top 10 in total fleet capacity: 91 % Share Top 10 in total fleet capacity: 71 % Sources: DVZ, 14.4.2021 based on Alphaliner; and Notteboom et al. 2021 Worldwide availability of empty containers since Jan. 2019 12 Early 2021: - A bottleneck of 600,000+ TEU stuck in LA / Long Beach Ports due to pandemics among 1 dockworkers; N.A. West Coast trade unions have not made it easier to solve the issue - Empty containers almost globally “in the wrong places” - Chinese New Year affecting industrial production again in 2021 0.75 - Stronger than expected industrial and consumer demand boosting global trade 0.5 Values 0.25 0 Source: Container Exchange (CaX), the index compares empty containers port inbound with outbound containers: the lower the index value, the lower the availability of empties for export. Prof. Lauri Ojala on Container Shipping, 29 April 2021 Schedule reliability* in container shipping at an all-time low 13 In Q4/2019, average schedule reliability was at 80 %. Disruptions, blank sailings and scarcity of containers turned liner shipping reliablity to a very low level even before MS Ever Given. In April 2021, the reliability is at an all-time low. *) Arrivals within a 1 day range of schedule Source: Bolloré 2021 Prof. Lauri Ojala on Container Shipping, 29 April 2021 Supply chain implications of global shipping bottlenecks14 compounded by the MS Ever Given incident The most significant is the global lack of semiconductors – only partly attributable to COVID-19, but made much worse by shipping logjams: Estimated losses/lost sales in automotive industry alone USD 60+ billion; also electronics industry probably affected by USD 50+ billion in 2021 Prof. Lauri Ojala on Container Shipping, 29 April 2021 Conclusion in the current situation (April 2021) 16 • All trade lanes are concerned and impacted, this affects especially manufacturing industry supply chains globally • Increase of the rates for the next one to two months • Shortage of equipment a real concern for the next 2+ months • Container shipping demand stronger than carriers’ Offer/Capacity • Peak season is still on going • Suez canal consequences will be strong till Q3/2021 and beyond Prof. Lauri Ojala on Container Shipping, 29 April 2021 THANK YOU! 17 Turun kauppakorkeakoulu Turku School of Economics Selected sources 18 • Bolloré (26 April 2021) COVID-19 MARKET OUTLOOK • Bolloré (April 2021) OCEAN FREIGHT MARKET OUTLOOK • DHL (2021) OCEAN FREIGHT MARKET UPDATE, April 2021 • Notteboom – Pallis – Rodrigue (2021) Disruptions and resilience in global container shipping and ports: the COVID-19 pandemic versus the 2008– 2009 financial crisis, Maritime Economics & Logistics • UNCTAD (2021) Shipping during COVID-19: Why container freight rates have surged? 23 April 2021 Prof. Lauri Ojala on Container Shipping, 29 April 2021.
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