Yup…via wsj…
Ship Stuck in the Suez Canal Is Freed
On my phone, from ALJAZEERA…
So is this a case of “I bet you can’t go through the Suez Canal sideways.” “Hold my beer!”?
Brad Thor linked an article about the 3 Russian Navy submarines smashing through the Arctic ice saying Scot Harvath was monitoring this situation closely. Someone linked a story about the Suez Canal clog and he said it gets a mention.
Which is a lot of the total number of container ships en route at any given time. Still, maybe I should have said that a crazy amount of cargo goes through the Suez Canal.
US News & World Report says 10% of “trade”… I’m not sure what that means. 10% of cargo?
They also mentioned 7% of oil.
So it’s a lot.
Apparently Egypt is claiming they lost $12-$15 million per day that the canal was closed.
I wonder if they had insurance
I think that the owner of the ship is legally liable. They’ll probably go bankrupt and then Egypt and all of the shipping companies that lost money will get a share of whatever assets they have.
I’ll see if I can find the article where I read that.
Makes sense, although aren’t some of those shipping firms massive? I wonder if marine cargo covers this sort of loss?
I’m guessing that any damage to the ship (little to none, I think) and possibly its own shipping delays are covered.
Whether there is liability coverage for shipping delays for hundreds of other ships and the lost Suez Canal fees and the extra time / fuel for the ships that opted to sail around Africa instead of waiting it out is a different question.
And of course ordinary Joe’s like you and me who must pay more for gas and probably other goods too… we won’t get a dime.
I have been researching a lot about the financial impact and a LOT of information has been reported badly, greatly exaggerating the real impact.
The $15million per day is a real good estimate of the daily value that Egypt collects as operators of the canal. I read that Egypt collects 5.6B annually, which totally hangs together with the 15M per day estimate. With the canal blocked, I assume that the collection of “tolls” came to a halt. But reports are that the canal averages 50 transits per day but can run at a capacity of 106 transits per day means that the back log of ships that are sitting outside the canal will be cleared in a week or two as the canal catches up running at high capacity.
Now, some of the ships decided to go around Africa rather than wait out the arterial blockage. Egypt will presumably lose revenue from those few ships. But Egypt will be collecting $30M per day for the next few weeks as it catches up on the transit backlog. So how much did it lose? It seems the answer is not too much.
The 400M per day number is a misreported, absurd number. An average of $400 million of cargo transits the canal per hour. That cargo, totaling billions , will be delayed to its destination. That doesn’t mean that the “world economy” is losing the value of the goods. No doubt a small fraction of the cargo that is time sensitive may be lost, such as livestock, but most of the cargo will reach its destination up to two weeks late. If you order a $1000 TV on Amazon that arrives a week late, you may be inconvenienced, but you havn’t lost $1000.
There will be some catch-up, but if a boat got delayed by a week, that boat is going to make perhaps one fewer trip through the canal in 2021. So the loss would be the number of boats that went around Africa plus the number of fewer trips that get made due to delays.
I’m picking nits, I agree with your larger point that the press ran with ‘this is costing a quadrillion dollars,’ when the reality is it’s much smaller.
It’s delayed economy, not completely lost economy.
This article, in Business Insurance, pegs the shipping industry loss at 24M for the incident (not including whatever was spend on digging and tugboats). That’s 10,000 to $15,000 per day times somewhere between 260 and 400 ships sitting idle outside the canal for 1 to 7 days each. That’s a far, far cry from 400M per hour.
Time value of money.
With short-term interest rates being negative, this is a win!
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Who is liable for the various costs?
From what I read, the Japanese company that owns the ship is the one legally liable for pretty much everything. (Extrication costs, any damages the Suez Canal suffered, and lawsuits from other affected shipping companies.)
But how various possible insurance coverages may come into play, and who those insurers are… I have no idea. Apparently they have $13 billion of liability coverage. So the lawsuits will drag out for years as everyone claims their share of that $13 billion.
And then the owner might be able to go after the operator… it’ll be a mess.
Here’s one article I’ve seen on the topic:
From The NY Times:
You can’t get blood from a stone. The captain may be responsible, but he’s not going to pay a ton of damages.
Well, i bet it will be settled faster than the world trade center bombing. The lawsuit regarding whether it was one or two events (with one or two deductables, etc.) took more than a decade…
The way high levels of coverage are reinsured, pretty much every carrier that is in the business at all will end up with a slice of this pie. Probably several will have (partially) reinsured their own coverage.
I don’t mean the captain.
I mean the Japanese shipbuilder that owns the boat may go after the Taiwanese freight/shipping company that operates the boat. If there was human error involved then it would most likely be the operator who hired the humans who were at fault. (Unless one or both pilots were the only humans to make the error(s). It sounds like the Suez Canal Authority is fairly well shielded from legal liability.)
The crew are mostly Indian. I don’t imagine there is all that much to go after there, although I suppose the captain probably makes pretty good money at least by Indian standards. Whether it’s enough to bother going after when the USD losses are likely in the 11 digit range… eh, probably not worth the legal expense. At most you’ll get several hundred thousand from him… at most. But someone may try, particularly if he’s found to have erred.
There’s going to be no shortage of plaintiffs seeking damages, that’s for sure.
How did that shake out? I would think that where it was a coordinated event it would count as one, but I suppose that the insurers wanted two.
I’m not sure about the “faster” part though. Japanese owner, Taiwanese operator, Panamanian flag, Indian crew, Egyptian pilots, plaintiffs from basically everywhere… it might take a decade just to decide which court(s) have jurisdiction
Yeah, I assume this is true. And I know sometimes insurers can wind up with a bigger slice of the pie than they intended if it turns out that through various reinsurance/retrocession agreements they have what turns out to be multiple slices of the same pie.
I know life insurers are notoriously bad about keeping track of that sort of thing. (We don’t want to retain more than $X on any one life… but we have $X for Bob on policy 1 then another $X for Bob on policy 2, then we have $0.5X for Bob on a third policy that’s in a block of business we bought from another carrier two decades ago, then we reinsure Bob’s group policy for another $0.9X, and Bob’s wife bought spouse coverage for Bob for another $50,000… crap we’re actually covering Bob for $3.4X + $50.000 when we’re not supposed to have more than $X of exposure on anyone.)