The Maersk Dali is a crisp reminder of the value of cargo insurance when you finally need it. In the news of late and conversations on some of the calls we have participated in concerning the Key Bridge disaster in Baltimore harbor is the mention of “General Average Claim.” General Average spans back to the York Antwerp Rules of 1890; American companies accepted it in 1949. However, the custom of contribution that General Average evolves from dates to the six-century A.D. Roman Law. It distributes extraordinary losses and expenditures to complete a voyage among ALL parties that have cargo aboard the vessel.

In the case of the Dali, the costs are expected to exceed 10% of the value of what was carried on board in lost goods due to containers overboard, refrigerated containers that lost product when the vessel lost power, damage/loss from damaged containers, the costs to clean-up the harbor if any, tug and tow assist and repair to vessel to make a safe harbor, salvage expense, temporary accommodation for passengers and crew on board during salvage operations, and other items as they become known and are required for the vessel to complete its voyage (reach a point of discharging freight).

The value of all the cargo and the value of the vessel are calculated into one sum. Then a weighted percentage by cargo value owned (or the value of the vessel in the owner’s case) are tabulated. The total costs and losses are portioned out to each party that has freight aboard on their weighted percentage of value they have on board. So, if $10 million of cargo is on board, and your cargo is valued at $2 million, you have 20% liability. If in turn total costs/losses to complete the voyage equal $4 million, you will owe $800,000. These claim demands for payment are for cash and can be very constraining when the payout has to be made while you are still working to get the cargo moving again toward its original or alternate destination.

For the uninsured, the cargo is seized and a deposit is required. Uninsured shippers may be required to post deposits greater than those with insurance. This deposit will also be held until the claim(s) are finally resolved. For the insured, claims of this type are reportedly swiftly responded to by the insurer to ensure little delay of regaining freedom to move the cargo. The final settlement conversely can take five years to conclude.

This would be a good time to review what coverage you have with the cargo insurance you are using, and strongly consider the costs and losses you could be subject to if you have not been utilizing insurance.

The Journal of Commerce put this graphic out last week that tells the story of just how much new capacity was gained in 2023. Already slow steaming, there are many excess containers operating on the East Coast to compensate for the slow chug around Africa (avoiding Suez), and post pandemic import slack – this doesn’t brighten the picture ahead for steamship liners (SSL).

Eventually, one expects the Suez situation to improve, creating a flip on “extra” containers back from East to West that are currently compensating for the longer run. SSLs remain determined to scale themselves to being “right-sized” based on the current economic condition they find themselves. They want full vessels and will seemingly sacrifice regular service to minimize losses in this environment. SSGA members are wary of dropped sailings/rolled bookings, inconsistent arrival for exported cans and a myriad of resultant fees for shippers and customers that are unannounced are likely to be the result.

We will be talking about how this and other dynamics will likely affect container movement of agricultural products in the next decade at Transportation Go! March 13-14 in Toledo, Ohio.

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As of Jan. 5, more than 420 container ships carrying 5.75 million twenty-foot equivalent units (TEUs) have diverted the Red Sea and are traveling around Cape of Good Hope. These shipment delays, coupled with the upcoming Lunar New Year holiday, are causing congestion in ports and increased spot rates. The next few weeks ahead of the New Year are expected to be very difficult for shippers but should subside after the holiday, according to Drewry Shipping in Journal of Commerce.

The Houthi attacks appear to be only affecting container traffic, as tanker and dry bulk vessels continue to use the Red Sea and Bab-el-Mandeb Strait at similar rates as before.

Operation Prosperity Guardian, the U.S.-led initiative to protect international ships on the Red Sea hasn’t gained traction as expected. Tobias Borck of the Royal United Services Institute believes the lack of participation could be due to political framing of the initiative, which has public participation from fewer than half of the countries expected to join. While there is strong support for the mission, the issue lies within the way the Houthis are framed.

“What’s at issue is the framing of the Houthis, and the way they are seeking to frame it,” Borck said. “On one side, [they] are compared to Somali pirates – armed non-state actors assaulting free movement – but on the other, they claim they are doing this to engender a ceasefire in Gaza.”

Read more about the initiative here.

More than 360 Canadian workers on the St. Lawrence Seaway began striking on Sunday for higher wages to keep up with rising living costs. The bi-national St. Lawrence Seaway is an important shipping corridor for several North American industries, including agriculture, energy, steel, construction and manufacturing. The seaway has 13 locks in Canada and two in the U.S.

Currently, there are no vessels waiting to leave the seaway system but more than 100 outside of the seaway will be impacted. Read the latest on the strike here.

On the opposite side of the U.S, holiday demand and the passage of the International Longshore and Warehouse Union contract led to the busiest September ever for the Port of Long Beach. The 829,429 twenty-foot equivalent units (TEU) moved in September is up nearly 12% year-over-year and passes the previous record from September 2020. The Port of Los Angeles is also showing a bit of recovery in recent months including a 5% year-over-year increase in September. Los Angeles and Long Beach ports are major gateways for agriculture products to Asian markets. Even in the midst of a large U.S. grain and oilseed harvest, freight rates are expected to be low with lower-than-normal export volumes expected.  Read more here.

Hong Kong-based container line Bal Container Lines recently filed a complaint with the Federal Maritime Commission (FMC) regarding nearly $9 million in congestion surcharges from SSA Marine at the Port of Long Beach. Bal Container alleges they were never told the purpose or trigger of the surcharges, how to alleviate the fee or how the fee could alleviate congestion. SSA has 25 days to file a verified response with the FMC.