Bigger delays on the horizon
Figuring out costs of clearing a wayward vessel from the Suez Canal could take years
TOKYO — It took six days to prise free 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 sort out who will pay for the mess.
Cargo companies, insurers, government authorities and a phalanx of lawyers, all with different agendas and potential assessments, will not only need to determine the total damage but also what went wrong. When they finish digging, the insurers of the ship’s Japanese owner are likely to bear the brunt of the financial pain.
The costs could add up quickly. There are the repairs for any physical damage to the Ever Given, the quartermile-long ship that got stuck in the Suez. There is the bill for the tugboats and frontend loaders that dug the beached vessel out from the mud. The authority that operates the Suez Canal has already said the crisis has cost the Egyptian government up to $90 million in lost toll revenue as hundreds of ships waited to pass through the blocked waterway or took other routes.
And the stalled ship held up as much as $10 billion of cargo a day from moving through the canal. Companies delivering goods may have to pay customers for missed deadlines.
All that could amount to insurance claims in the hundreds of millions of dollars.
The financial mess will ensnare a multinational web of businesses, led by the Japanese owner of the ship, its Taiwanese operator and the German management agent that hired the crew, as well as myriad cargo companies that rented space in the ship’s containers and a sprawling pool of insurance firms across the globe.
The ultimate responsibility may fall to the insurers for the ship’s owner, Shoei Kisen Kaisha Ltd., a subsidiary of the 120-year-old shipbuilder Imabari.
Teams from the German company that hired the crew and a consortium of insurers for the ship’s owner are starting to investigate what caused the marooning. Authorities in Panama, where the ship is registered, are also conducting an inquiry, as are investigators for other interested parties. Their findings will complicate questions of liability, keeping claims adjusters and lawyers busy for years.
Investigators want to know “who was responsible for the disruption — was it the crew, the pilots working for the Suez Canal Authority, or is it just an act of nature or a freak accident by the wind?” said Richard Oloruntoba, an associate professor of supply chain management at the Curtin Business School in Perth, Australia.
Even after inquiries are completed, Oloruntoba added, “it’s not clear-cut. It all depends on how good the lawyers are and also the contracts that were entered into.”
The most straightforward aspect is damage to the ship and canal. Those costs usually fall to insurers of the ship’s owner, in this case a consortium led by Mitsui Sumitomo Insurance in Tokyo.
The trickier piece of the puzzle is the cargo. Companies that booked containers on the vessel, as well as some of the 400 ships that had to wait, may file claims.
But most insurance policies don’t cover economic losses for cargo delays. So companies will have to make specific cases why they’re entitled to compensation. Such claims could reach hundreds of millions of dollars.