Ever given up escaping the Suez Canal. But the company behind the ship has yet to make an effort to save itself from a much bigger problem: the ongoing slowdown in the industry, writes The Wall Street Journal.
Imabari Shipbuilding Co., whose history began more than a century ago in the small Japanese town of Imabari, established three years ago. A affiliate, Shui Cizen, owns it.
The group’s first step now will be to deal with insurance proceedings after the ship spent six days in the Suez Canal causing delays to hundreds of ships traveling between Europe and Asia. Shuai Kizen says the damage to the ship will be covered by Japanese insurers. And another insurance plan, mandatory in the industry, will protect it from claims by other companies. “Everything will be covered by insurance,” said Rio Murakoshi, chief financial officer. “We expect to pay higher premiums next year.”
A much bigger problem for the company will survive against the backdrop of the slowdown in shipbuilding, an industry that has never fully recovered from the crisis of decades ago. Both Japan and countries like China and South Korea, which have surpassed it in shipbuilding, have seen a decline in orders in recent years.
In the year to the end of March 2020, the construction of Embry ships, the largest shipbuilding in Japan, reported its first annual loss in decades. President Yukito Higaki says the epidemic reinforces stagnation in new regulations. According to him, some transport companies are waiting to see in which direction the new ecological regulations will go before placing orders.
Ever Given is an example of an attempt by companies in the industry to survive. The container ship is among the giants – with a transport capacity of 20,000 6-meter-long containers. Experts point out that the reason the ship is so large is the price. A ship carrying double cargo does not need double crew or double fuel. This way, companies can reduce container costs.
But they can not grow forever – especially if the ports and canals around the world do not get deeper and cranes do not rise. And filling the ship with cargo takes longer: if a container ship can carry 100,000 containers, picking them up for one company can take 6 months, which does not make economic sense.
Imbury shipbuilding has managed to stay in the midst of a contraction in the industry and thanks to a number of acquisitions. Its annual revenue is about $ 3.5 billion. On January 1, the company signed another alliance: with the construction of the ships Japan Marine United.
With hundreds of thousands of people employed in the industry and a source of national pride in countries like Japan, Korea and China, it has long enjoyed state support. Last month, Tokyo began discussing a bill that would offer more tax breaks and subsidies to companies.
Without it, however, “the Japanese shipbuilding industry will not last long,” Higaki said.
After several days of blockage the Suez Canal will reopen
The cargo ship Ever Given has been released by rescue crews