Sea Transportation: Bigger, Safer, Cheaper

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June 28, 2019: While the risk of pirate attacks against merchant shipping has declined sharply since 2011, part of the reason is the growing number of larger, more efficient and better-equipped merchant ships replacing many older, smaller ships. A major factor in the growth of shipping capacity by fewer, larger ships was the worldwide recession of 2008-9. This recession caused a major decline in the demand for merchant shipping. At the recession peak, nearly 15 percent of the world’s 90,000 seagoing merchant ships were idle because there was no work. The large number of idle ships was made worse because shipping rates fell up to 90 percent by 2009. Many ships were barely breaking even with full cargoes and many of the older, smaller ships were retired early because they could not make a profit while new, larger ships were far more profitable. At the time about 10,000 new ships were on order. Additional orders for new ships declined and that ship count continued to shrink even when the recession faded after 2010. A lot of older, smaller ships were gone and it made economic sense to concentrate on expanding shipping capacity with fewer, larger, more efficient ships. By weight and carrying capacity more of the cargo was carried by fewer ships and these tended to be bulk (grain, ore) carriers, container ships and tankers. The smaller ships tended to be general cargo types and smaller tankers serving local markets, often just going short distances along coasts.

The piracy attacks were never more than a nuisance while the major threat continued to be equipment breakdowns at sea that resulted in foundering (sinking or running aground). Fortunately, the larger ships were also safer and more reliable. Thus in 2018 these breakdown accidents and ship losses hit the lowest rate in over a century. During 2018 only 46 seagoing merchant ships were lost worldwide. That is down from 98 in 2017. These losses rarely make the news unless they involve a passenger-carrying ship or a loaded tanker. The cause of ships lost, and accidents in general, are generally equipment failures while underway at sea. There are thousands of such breakdowns each year but most are quickly fixed, at least enough to get the ship safely to a port. Another cause of problems are fires, which are increasingly due to ships carrying dangerous cargo that the crew is not trained to handle. Fires at sea involving particularly flammable substances can quickly get out of control and lead to the ship being lost.

Another major factor is the number of major storms (hurricanes and typhoons) each year. In 2018 there were far fewer of these than usual and that led to fewer storm-related accidents. While dangerous weather, especially where there will be fog, high winds and major storms, can be tracked and predicted with more accuracy than ever before, this tempts many merchant ship captains to gamble that they can evade or outrun a storm or a patch of any bad weather. These large ships cost over $200,000 a day to operate at sea and the captains are under pressure to stay on schedule. Miscalculating the impact of bad weather causes much more damage at sea than just ship losses. This is particularly the case with container ships, where the loss of containers going overboard in bad weather is a major source of insurance claims. A lot of these containers stay afloat for a while and if too many hit the water in busy shipping channels other ships can hit them and then you have more damage and insurance claims.

Modern technology has made collisions less common, especially in crowded shipping lanes. The shipping channels near the Straits of Malacca and Singapore are so busy because a third of global merchant shipping passes through those straits each year. But more dangerous shipping lanes are farther north, where bad weather and poor visibility is more common. That means the English Channel and shipping lanes off northern China, Korea and Japan are also more of a problem. The situation is worse for warships, which have younger and less experienced crews. For merchant ships, age and experience are more common among the crews, although the degree of automation is higher as well and when there are problems with the navigation systems in crowded shipping lanes there are more opportunities for accidents. Commercial mariners have an advantage in that they often work on a particular route regularly and this gives them a better sense when something is amiss and additional diligence is required.

The main goal is to not lose the ship and that is what happened in 2018 because the number of “incidents” at sea (2,698) was only one percent lower than in 2017 when twice as many ships were lost. All this puts the piracy threat into better perspective. Modern pirates are not interested in sinking ships, only in stealing portable valuables from the crew and the ship. Holding a ship for ransom is rare but kidnapping key crew members is more common in areas where there is a criminal network ashore to keep the hostages safe from rescue until a ransom is paid.

The smaller number of larger ships also has military implications. It means fewer ships have to be attacked and sunk or put out of action to have an impact. That is considered a minor threat by shipping companies because most of the time fires, breakdowns at sea or unexpected bad weather are the major cause of losses.

 


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