Packaging directly protects cargo and is critical for cargo transportation. In the maritime industry, where the risk of cargo damage is greater, a change to proven cargo packaging methods can present significant challenges to cargo owners, carriers and the insurer.
As global freight rates have risen since 2020, buyers and sellers seeking affordable trade solutions have realised that costs could be reduced by changing cargo packaging. For example, plywood and steel coils, once shipped in containers, are often now treated as bulk cargoes and stowed in the hold of a vessel.
Containers, as the outermost packaging layer, provided adequate protection and airtightness for this cargo. Analysis of damage to plywood and steel coils from 2017-2024 shows an upward trend until 2022 with levels returning to 2017 baselines in H1 2024.
The downward trend in damage observed in H1 2024 stems from optimising shipping configurations – taken from accumulated operational experience over the previous three years – and restricting plywood to the uppermost cargo hold layer; and bracing the hollow parts of steel coils with longitudinal timber battens.
During the period 2017 to 2022, insurers faced an increase in insurances risks when packaging was simplified to generate economies. Although there are industry standards and international norms that describe the packaging of goods, there are no clear packaging requirements and sellers can make adjustments within the norms as they see fit. Additionally, there is no clear packaging provision in the underwriting terms of cargo insurance. This means that although the insurer is aware that a simplification of packaging has taken place, they are often unable to verify whether the packaging is insufficient during the claims process, thus affecting the assessment of insurance liability.
Cargo packaging in the maritime industry is not always consistent and is usually influenced by policies, economic conditions and such like. When this situation arises, no party should be on the sidelines and all should participate actively.
