Sea Transportation: Ever Given Confidential

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July 28, 2021: On June 23 lawyers for the SCA (Suez Canal Authority) and Shoei Kisen, the Japanese owner, and their insurance company Stann Marine agreed on a deal that would free the container ship and its 18,000 cargo containers. In March the Ever Given ran aground in the canal and blocked it for six days. Finally freed on March 29th, Ever Given, instead of receiving an apology for the accident, was seized as Egypt demanded $993 million for “loss of business and reputation”. That demand was later reduced to $550 million. The final settlement was less than half the demands and payable as installments. Details of the settlement were not revealed except that one condition was that Shoei Kisen would give SCA a tug boat with a towing capacity of at least 75 tons.

It is unclear if the insurance company lawyers or the Ever Given owner will continue the litigation against the SCA, but Shoei Kisen did subsequently file lawsuits in Britain against several other parties involved with the Ever Given, including Evergreen Marine Corp, the Taiwanese company that managed the Ever Given operations.

Egypt was correct in claiming the Canal Authority suffered loss of reputation but did not realize that the litigation revealed even more damaging details that further embarrassed the canal management. In the last year nearly 10,000 ships moved through the canal, paying an average fee of $586,000 each. Fees are based on size and Ever Given was among the largest ships moving through the canal, but expected to pay about $470,000 for the transit in which it got stuck. For that kind of money, the Ever Given owners expected safe passage. Operators of large container ships have been unhappy with the high canal fees, which a year earlier were $700,000 for a ship the size of Ever Given. In response to many large container ships going around South Africa in response to the high fees, mainly because for ships that size it was cheaper, the SCA lowered its fees for the largest ships like Ever Given. Now more operators of large ships are considering using the South Africa route unless the SCA makes some changes in the way it operates, and responds to accidents that were, according to other large ship owners, clearly the fault of the SCA.

What Egypt initially demanded for letting the Ever Given go was worth more than the Ever Given and its cargo were worth and lawyers for the owner argued that the Canal Authority is responsible for the safety of ships using the canal. In this case, the Canal Authority knew that a major sandstorm was coming and could have halted larger ships from entering the canal until the storm passed. Once in the canal a pilot, an employee of the canal authority, is in charge. In the case of the Ever Given there were two pilots who were not up to the task when the exceptionally violent sand storm hit as they were guiding the massive container ship through one of narrowest portions of the canal. The Ever Given “black box” recorded who was saying what to who and what changes in speed and direction were made. These recordings got out and made it clear that the two pilots argued what to do about the high winds and sand storm and made some clearly unsafe decisions. The pilots were not trained to handle a large ship and the captain’s comments at the time made that clear. What was also clear was the SCA did not follow its own rules to provide a certain number of tugboats for a ship this size and only one of them was present when the Ever Given got into trouble and the pilots could not agree on how to deal with it. The SCA has since announced that it will improve pilot training for larger ships and obtain additional tugs so the proper number are available for large ships. The SCA is also widening the narrowest portion of the canal, where the Ever Given was when it got stuck because it was longer than the canal was wide at that point. The SCA did not admit that it made all these mistakes but experienced canal users noticed.

Blaming and extorting the victim is not a good idea when large ships like this account for a disproportionate and growing portion of canal revenue. The Suze Canal is a major source of government income and a national treasure historically and economically. In the fiscal year ending in June the canal had record revenues of $5.72 billion, up 2.2 percent from the previous year. This accident cost Egypt some income, which was quickly recouped, along with the cost of getting the Ever Given free.

The Ever Given entered service in late 2018 and is one of the largest container ships in service. Two Egyptian pilots were steering the ship when the heavy winds and sandstorm showed up. The Ever Given accident was rare but not unknown. Since 2004 there have been three other blockages, all of them cleared more quickly because the ships involved were smaller. Fortunately, the canal recently completed a $9 billion upgrade that increased the number of ships that could move through the canal per day from 49 to 97. This required the canal pilots to learn how to handle different size ships in the portions of the canal that had changed. That training was not yet completed at the time of the Ever Given accident.

The canal was opened in 1869 and became increasingly busy as the world economy increased. At the time of the Ever Given accident about 60 ships a day were going through the canal. Most of the ships backed up stayed in line waited a week or more to get through the canal. Going around Africa burns a lot of fuel and can be a risky voyage, but not so much for the largest ships, especially when oil prices are low. Egypt regained most of the billion dollars in lost transit fees because of the increased traffic during May. The cost of freeing Ever Given was not large because dredges and tugs normally working for the canal were used. Since few details of the Ever Given negotiations were made public before the settlement it is not yet clear how the canal upgrades and pilot retraining figured into the accident. That may come out in the continuing litigation, even though the SCA demanded that the details of the Ever Given settlement remain confidential.

 


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