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In 2014, 75 ships were lost at sea around the world, which is the lowest number in the last ten years. According to insurer Allianz Global Corporate and Specialty, sinking and submerging was the most common cause of ship loss, with 49 of the 75 losses resulting from this. Despite a downward trend in ships lost per year over the last decade, it is feared that the increasing size of container ships will make losses much more costly.
The introduction of containerization in the 1950’s revolutionized the global shipping industry. This innovative concept reduced loading costs from $5.83 to $0.16 per ton and made loading and unloading ships easier and more efficient. Now shipping companies are producing massive container ships that can hold close to 20,000 twenty-foot shipping containers. These large-capacity ships allow shipping companies to cut costs and thus increase profits through economies of scale; however, losing a vessel of this size can cost upwards of $1 billion.
Ship loss can also be caused by intentional factors, such as piracy and cyber-attacks. Although piracy has declined in Somalia and the Gulf of Guinea the last four years, it is growing in south-east Asia and the Indian subcontinent. Cyber-attacks are a relatively new threat in the shipping industry, but can be detrimental if a ship’s e-navigation system is hacked. Modern ships are becoming increasingly reliant on e-navigation and interconnectivity, which leaves them vulnerable to cyber-attacks. Experts have warned of the catastrophic potential of these attacks and have advised shipping companies to implement mitigation strategies.
There is no question that shipping containers have been instrumental in the evolution of the global shipping industry over the last several decades. However, there are risks associated with these massive ships that must be considered. It will be interesting to see how the industry reacts to the heightened risk of cyber-attacks, and which strategies companies employ to combat these attacks.
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