Ever Given escaped the Suez Canal. But the company behind the ship has yet to make an effort to save itself from a far bigger problem: the continuing downturn 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, built Ever Given three years ago. A related company, Shoei Kisen, owns it.
The group’s first move now will be to deal with insurance procedures after the ship spent six days in the Suez Canal and caused delays for hundreds of vessels traveling between Europe and Asia. Shoei Kisen says the damage to the ship will be covered by Japanese insurers. And another insurance program, mandatory in the industry, will protect it from claims from other companies. “Everything will be covered by insurance,” said Rio Murakoshi, chief financial officer. “We expect to pay higher premiums next year.”
A far bigger problem for the company will be surviving in the midst of a downturn in shipbuilding, an industry that has never fully recovered from the crisis of decades ago. Both Japan and countries such as China and South Korea, which have overtaken it in shipbuilding, have seen a drop in orders in recent years.
In the year to the end of March 2020, Imabari Shipbuilding, Japan’s largest shipbuilder, reported its first annual loss in decades. The pandemic is cementing stagnation in new orders, according to its president, Yukito Higaki. According to him, some transport companies are waiting to see in which direction the new eco-regulations will go before placing orders.
Ever Given is an example of the experience of companies in the industry to survive. The container ship is among the giants – with a capacity to transport 20,000 6-meter containers. Experts say the reason the ship is so big is the price. A vessel carrying twice as much cargo does not need a double crew or twice as much fuel. This way, companies can reduce container costs.
But they can’t grow forever – especially if ports and canals around the world aren’t made deeper and cranes don’t get taller. And filling the ship with cargo takes more time: if a container ship can carry 100,000 containers, collecting them for one company can take 6 months, which makes no economic sense.
Imabari Shipbuilding managed to stay in the midst of the contraction in the industry and thanks to a number of acquisitions. Its annual revenue reaches about $ 3.5 billion. On January 1, the company signed another alliance: with shipbuilder Japan Marine United.
With hundreds of thousands of people employed in the industry and a source of national pride in countries such as 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 a few days of blockade, the Suez Canal will reopen
The cargo ship Ever Given was released by rescue teams
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