An explosion at the Chinese port of Ningbo-Zhoushan last month has once again intensified the industry’s attention on mis-declared cargoes and fueled warnings from insurers for operators to better understand the value of goods in their care.
A heat wave at Ningbo-Zhoushan, China’s second-busiest container port, triggered an explosion on the Taiwanese-owned YM Mobility, being loaded at one of the port’s berths. The cause of the explosion is still being investigated, but local media reported that it may have been caused by a combination of factors such as the unseasonably high temperatures in the area and the presence of volatile materials (lithium-ion batteries and parabens) in the ship's cargo. The shipowner suggested these hazardous materials may have been stored improperly in the container.
While the explosion was felt up to a kilometer away, there were no casualties. Nevertheless, it was reminiscent of bigger explosions at the ports of Beirut (2020) and Tianjin (2015), in China, which combined cost almost 400 lives and injured thousands.
A series of recent container fires last year, both at sea and on land, attributed to the presence of lithium-ion batteries sharpened industry responses and guidance on the materials. But technologies, such as those that support global decarbonization efforts, continue to emerge for trade and the established risk controls don’t always keep pace. Therefore, fire risks from the carriage of hazardous materials are ever present for the world’s ports and terminal operators, who rely heavily on robust industry adherence to the rules outlined in the IMO’s International Maritime Dangerous Goods (IMDG) Code and accurate declarations of the cargoes they handle.
The International Cargo Handling Co-ordination Association’s Cargo Integrity Group has recently identified 15 ‘cargoes of concern’ 6 of which can cause container fires when mis-handled, including:
Unfortunately, global adherence to best practice handling, storage and declaration of hazardous materials can be haphazard, when disproportionate amounts of trade moves by sea. This shortfall is particularly apparent among cargo owners who use shipping as their main form of transport.
A study on containerized sea trade from the U.S. based National Cargo Bureau (NCB), supported by some of the world’s biggest shipping lines, found more than half (55%) of the containers they inspected didn’t comply with national regulations for transporting hazardous cargoes; similarly, 43% revealed poorly secured dangerous goods.
Alarmingly, 6.5% of containers were found to be carrying misdeclared dangerous cargoes. Subsequent NCB audits, have revealed similar levels of undeclared / misdeclared shipments of dangerous goods such as charcoal, flammable liquids, and used lithium-Ion batteries.
6.5% of containers were found to be carrying misdeclared dangerous cargoes.
In the last ten years, more attention has been given to safety measures, better booking systems and new fire detection and firefighting systems. However, it’s still hard for container port operators to know what cargoes are in the boxes they handle and store.
There are other worrying trends. Shorter term, the global rise in geopolitical conflicts, such as the one currently diverting Asia-EU trade from the Red Sea around Africa, is disrupting supply chains and driving congestion to an 18-month high at some of Europe’s primary ports. The overflow is putting pressure on the continent’s smaller ports, which are less able to handle the mega-ships and are less prepared to manage the greater risks their cargoes can present. While this is currently happening in Europe, it could happen anywhere.
Longer term, more than 90% of the world’s commercial fleet still runs on conventional carbon-based fuels. This is changing as shipping transitions to meeting its zero-carbon emissions target by 2050, meaning more low and zero-carbon fuels like LNG, methanol/ethanol, biofuels, ammonia and hydrogen will need to be stored at ports or nearby facilities. Many of these fuels are likely to be more volatile than the industry’s current regular fuels.
There are already questions about whether employees at many ports are equipped, with adequate training, bespoke equipment and defensive strategies, to handle the unique characteristics of fires caused by lithium-ion batteries. The increasing presence of the new fuels and their unique risks profiles will intensify those questions and, presumably, the attention of insurance adjusters.
Questions will be increasingly asked whether port facilities and their managers are fully equipped and trained to deal with the influx of dangerous goods. Operators who are seen to accept contracts to handle, store or distribute those cargoes without dedicated equipment and personnel to manage potential crisis events are very likely to see their risk assessments and premiums rise, especially if any losses are adjudged to have been worse because of the port’s related shortcomings.
Even the most prepared operator can’t eliminate all risks. Explosions, especially those caused by mis-declared cargo, are classic examples of the type of unpredictable risks that insurance products were created to transfer.
But the expertise that underpins an exact assessment of a port’s risk exposure needs to be held by the owner or operator of each specific facility. Often owners or operators buy less insurance, not because they want to pay less, but simply because they don’t have a clear understanding of the value of the goods moving through their facilities.
If an operator can show the adjustor exact knowledge of the values transiting their facility at any given time — and then prove their ability to manage unexpected events — that will have a positive impact on the insurance they purchase.
The recent incident involving a cargo ship carrying ammonium nitrate showed how important it is to declare the cargo correctly to manage port risks. The ship was moved from Tromsø, Norway, to a safer anchorage.
For smarter ways to assess and offset current ports and terminals risks, please contact a member of the team.
