The shipping industry has recently witnessed a significant rise in weather-related cargo losses and insurance claims, driven by carriers being forced to navigate the perilous waters around the Cape of Good Hope. With the ongoing threat of Houthi attacks in the Red Sea, vessels have been re-routing to southern Africa, exposing themselves to extreme weather that they would typically avoid.
Over the past 270 days, this re-routing has led to a string of incidents involving cargo damage or loss. In fact, between 2 June and today, five major incidents have been recorded, highlighting the increasing risks associated with this route. According to maritime claims consultant MK Webster, these events include:
- 2 June: Car-carrier Hoegh London sustained structural damage off Port Elizabeth, leading to significant cargo damage.
- 8 July: Ultra Galaxy developed a heavy list in challenging conditions off South Africa’s west coast, forcing the crew to abandon the ship. The vessel later ran aground and capsized.
- 9 July: CMA CGM Benjamin Franklin lost 44 containers overboard in rough seas south of Durban, with a further 30 containers sustaining damage.
- 15 August: CMA CGM Belem suffered a collapse of containers on deck, losing 99 boxes overboard near Richards Bay.
- Most recently, MSC Antonia lost 46 containers overboard, with another 305 damaged, 29 nautical miles northeast of Port St Johns.
Patrizia Kern, chief insurance officer at Breeze, an embedded cargo insurance provider, emphasised the rising risk: “Higher-than-average wind speeds around the Cape of Good Hope, combined with ongoing turmoil in the Red Sea, have led to an unprecedented surge in insurance claims.”
Why Has Cargo Loss Surged?
Historically, ships would steer clear of the rough seas near South Africa, especially during the transition from winter to spring in the southern hemisphere. Last year, during the same period, there were no reported container losses in the region. However, the geopolitical challenges in the Red Sea have forced shipping lines to brave the Cape of Good Hope’s treacherous conditions, leading to this surge in incidents.
The World Shipping Council even noted that 2023 saw the fewest recorded container losses since it began tracking the data in 2008. This only underscores how much of an outlier this year’s incidents have been.
A critical factor behind these losses is a phenomenon known as parametric rolling. This occurs when the wavelength of the ocean matches a vessel’s rolling motion, increasing the angle of each roll with every wave. This can cause stacks of containers to buckle, resulting in collapses and cargo going overboard. According to an analysis by TT Club, while wave height is an important factor, wave length and period play an even more crucial role in inducing dangerous rolling conditions.
Implications for Insurance and Shipping Costs
With weather now emerging as the most influential factor in cargo loss around the Cape, insurers are bracing for the consequences. Ms Kern noted: “If this trend of increased cargo claims continues, we can expect a corresponding rise in insurance premiums.”
However, despite the alarming rise in claims, Ms Kern does not anticipate a specific surcharge for vessels transiting the southern hemisphere. “The exact impact will depend on various market factors, such as the availability of capacity,” she said. Historically, overcapacity in the shipping market has tended to drive premiums down, and this trend may continue as new players enter the sector.
The Need for Supply Chain Visibility and Climate Impact Software
As vessels continue to navigate these unpredictable waters, there is a growing need for businesses to invest in real-time supply chain and climate impact visibility software. By offering instant insights into weather patterns, shipping routes, and potential risks, such tools can provide Beneficial Cargo Owners (BCOs) and Logistics Service Providers (LSPs) with the critical data needed to make informed decisions.
With weather now an unpredictable yet critical factor in cargo safety, these tools enable stakeholders to adjust operations, mitigate risks, and protect their supply chains from sudden disruptions. In an era where both geopolitical and environmental challenges are shaping global trade, the importance of visibility cannot be overstated.
By integrating these data-driven solutions, BCOs and LSPs can better anticipate weather impacts, reroute vessels in real-time, and manage their insurance premiums effectively, ensuring continuity and reducing the risk of catastrophic losses.