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September 1, 2022

Voyager Product Announcements, Voyager Blogs

Supply chain congestion poses health risks for shipping

Living as we are in unprecedented times, it’s little surprise to read that two factors continue to heighten the risk profile for shipping and seafarers. A combination of port congestion and the impact of workers leaving the industry are combining to worsen short and long term problems.

Despite western countries declaring an end to the Pandemic, COVID-19 lockdown measures in China, together with a surge in consumer demand and fall-out from the invasion of Ukraine have combined to create unprecedented port congestion.

While congestion at the US ports of Los Angeles and Long Beach reached record levels in November 2021, with 116 container ships either in port or at anchor, by March 2022, Los Angeles was reporting its third-busiest month ever as work continued to clear marine terminals of cargo and reduce the number of ships waiting at sea. 

At the same time, repeated COVID outbreaks in China resulted in the staggered lockdown of Shanghai in March and April 2022 while the invasion of Ukraine merely compounded ongoing supply/demand pressures for shipping, which have resulted in port congestion, higher freight fees and longer transit times.

Overall, port congestion globally is running above the levels seen last year, with container fleet congestion trending towards previous highs. The impacts of the invasion are likely to create further inefficiencies across the maritime transport system, with tankers and bulk carriers travelling longer distances to source and deliver cargoes. 

In its Safety and Shipping Review 2022, Allianz Global Corporate & Specialty (AGCS) states that port congestion puts crews, port handlers and facilities under additional pressure, increasing risk at a critical stage of a ship’s journey.

As Senior Marine Risk Consultant at AGCS Anastasios Leonburg points out, “Loading and unloading vessels is a particularly risky operation, where small mistakes can have big consequences.”

“Busy container ports have little space while the experienced labour required to handle the containers properly is in short supply. When you add in fast turnaround times and port congestion, this may result in a significantly heightened risk environment.” 

Port risks are already increasing thanks to larger ships, which concentrate large volumes of trade into the fewer larger ports that have specialist infrastructure. Accumulations of cargo exposures at mega ports have been rising, while commercial pressures increase the risks of mistakes and accidents. Ports are also increasingly reliant on technology, where an outage or cyber-attack could effectively close a port.

“Commercial pressures are already a contributing factor in many losses that resulted from poor decision-making,” says  Nitin Chopra, Senior Marine Risk Consultant at AGCS. “The pressure on vessels and crew is currently very high. The reality is that some may be tempted to ignore issues or take shortcuts, which could result in future losses.”

As we should all know by now, seafarers were the unsung heroes of the COVID pandemic, keeping the world supplied with food, energy, raw materials and manufactured goods while the population was locked down. It’s a comfortable cliché to be sure but one that fails to reflect the seriousness of the situation for the people involved. Now, AGCS concludes, even though the Covid-19 crew crisis is now largely over, the longer term – and long-lasting – impacts are being felt.

“The health and wellbeing of crew has always been a critical factor in safety,” adds Captain Khanna. “However, morale among seafarers is currently low and the pandemic has had an impact on the mental health and well-being of crew. Now crews face a rising workload, while the ever-growing burden of compliance is making the job less attractive.”

In what has been termed the ‘great resignation’, the pandemic prompted many workers to rethink their work life balance, with some choosing to retire or switch careers. The combination of the pandemic and current working conditions risks a future skill shortage for the shipping industry, according to Nitin Chopra, Senior Marine Risk Consultant at AGCS. 

“During the pandemic hundreds of thousands of seafarers were unable to leave their vessels or see their families for a prolonged period. What they have endured will have a lasting impact, and it is likely many seafarers will not return. Shipowners in some segments could feel the pinch,” he added.

Crew welfare and retention rate is a risk factor considered in underwriting, explains Justus Heinrich, Global Product Leader Marine Hull at AGCS. “Our major clients have crew retention programs and we see a lot of investment in attracting and retaining crew, as well as welfare management,” he says. 

“From the perspective of our risk assessment, we like to see high levels of crew retention and evidence of good people risk management. Particularly with more modern vessels and technology, the ability to attract and retain experienced crew is critical.”

However Russia’s invasion of Ukraine has further ramifications for a global maritime workforce already facing shortages. Russian seafarers account for just over 10% of the world’s 1.89 million seafarers, while around 4% are from Ukraine according to the International Chamber of Shipping.

With many direct flights to Russia suspended, and with fewer vessels calling at Russian and Ukrainian ports, seafarers from these countries may struggle to return home or re-join ships at the end of the current contracts. Seafarers in the Black Sea are in a perilous situation, stuck onboard vessels or in ports with dwindling supplies and under fire, which is yet another blow for the industry and global supply chains, given crew levels have not yet returned to normal levels.

Regular crew changes are required across the world to ensure the flow of manpower is maintained. Last year, the ICS and shipping trade association BIMCO warned there could be a serious shortage of officers within five years if action is not taken to increase training and recruitment levels.

Such predictions have been made before and the industry has always proved able to manage. This time, the unique combination of circumstances mean it may not be able to stop its most valuable commodity – its people – ebbing away for good.

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