12 June 2024
The evolution of marine cargo risks: electric vehicles and lithium-ion batteries
Decarbonisation is influencing the nature of cargo that is regularly shipped across the globe. With at least six major automobile manufacturers and 30 national governments pledging to phase out sales of new gasoline and diesel-powered vehicles by 2040, the electric vehicle market has been growing rapidly.
Electric vehicles were responsible for 14% of global car sales in 2022, more than triple the 4% market share in 2020. Consequently, the lithium-ion battery market is expected to grow by over 30% annually over the next decade. Therefore, the volume of electric vehicles and lithium-ion batteries travelling by sea will continue to increase as the world progresses towards a more sustainable future.
Fire risk
In 2022 the US Coast Guard (USCG) issued a safety alert about the risks posed by lithium-ion batteries. It highlighted a container illegally loaded with discarded lithium batteries, which had been listed as “computer parts”. The USCG said the results could have been catastrophic if the container caught fire after being loaded aboard the containership.
Electric vehicles don’t necessarily pose a greater fire risk than vehicles with internal combustion engines, but considerable differences in storage, fire prevention and suppression are required. The advantages of lithium-ion batteries are obvious, namely high efficiency and cell voltage and low self-discharge. It is important to stress that, if handled appropriately, they are deemed safe. Yet mechanical damage, external thermal stress or overcharging all pose a risk, and the battery itself has the potential to emit toxic, flammable and explosive gases.
Fire was the second-highest cause of loss for the marine market last year, with eight vessels lost and more than 200 incident reports – the highest in a decade. Fire is also the most expensive cause of marine insurance claims accounting for 18% of the value of marine claims in 2021, a 5% increase from 2018.
Lithium-ion batteries in electric vehicles and cargo can cause fires when not stored, handled or transported correctly. Additionally, these battery fires pose a unique risk to shipping due to their rapid and ferocious nature. Current practice dictates that a fire alarm is sounded to visually confirm a fire before taking action. In a lithium-ion battery fire, it can develop so quickly that the fire could be out of control before it is confirmed. Toxic gases released by the burning batteries also pose an additional risk to the health of the crew who approach the fire. Insurers and the shipping industry are most concerned about thermal runway – a rapid self-heating fire that can cause an explosion.
Lithium-ion battery fires are capable of reigniting days after they have been extinguished, and many vessels lack appropriate fire protection, fire-fighting capabilities and detention systems to tackle fires at sea. Investigations into electric vehicle fires as a result of Hurricane Ian in Florida in 2022 led to the National Highway Traffic Safety Administration warning that electric vehicles have the potential to ignite weeks after contact with saltwater.
Investigations into electric vehicle fires as a result of Hurricane Ian in Florida in 2022 led to the National Highway Traffic Safety Administration warning that electric vehicles have the potential to ignite weeks after contact with saltwater
In January 2020, the fire that broke out on board the Cosco Pacific was attributed to the spontaneous combustion of miss-declared lithium batteries, listed as spare parts and accessories
Miss-declared goods
Shipping dangerous goods incurs premium rates, additional charges, extra paperwork and insurance is more expensive. Therefore, a growing number of fires have been connected to goods that have not been appropriately declared. In 2019, the Cargo Incident Notification System stated 25% of serious incidents on board containerships resulted from miss-declared dangerous goods. Recent evidence suggests that ratio could now be even higher.
In January 2020, the fire that broke out on board the Cosco Pacific was attributed to the spontaneous combustion of miss-declared lithium batteries, listed as spare parts and accessories.
There have also been at least five major fires on car or truck carrier vessels since 2015.
Hoegh Xiamen car carrier fire in June 2020 was caused by an electrical fault from an improperly disconnected battery in a used vehicle, resulting in the loss of 2,420 used vehicles and USD 40 million worth of damages, according to the US National Transportation Safety Board.
Felicity Ace, a ro-ro carrier owned and operated by Mitsui O.S.K. Lines, caught fire off the Portuguese coast on February 16, 2022, while it was carrying 3,965 new and used vehicles and sank on March 1, just under two weeks after the crew was safely evacuated. The cause of the fire is unknown, but salvage efforts were hampered by lithium-ion batteries igniting in some of the electric vehicles on board.
In July last year, a fire broke out on the cargo ship Fremantle Highway, which was carrying 4,000 cars, of which 498 were electric vehicles, from Germany to Egypt. One of the 23 crew members lost their life in the fire that burned for almost a week.
Future risk
The risks associated with shipping lithium-ion batteries and electric vehicles will only increase as the world transitions to cleaner energy. A recent study by the National Transportation Safety Board found that newer batteries are less likely to ignite or explode than older or used batteries. Therefore the risk potential could become greater as a growing number of used electric vehicles and retrofitted lithium-ion batteries are in circulation.
Battery malfunction often occurs during or following a charging cycle and can be intensified by faulty battery cells. The failure rate of lithium-ion batteries is low, but as the industry grows, so does the potential to manufacture uncertified batteries and devices.
The US transition to lithium-ion battery electric vehicles by 2050 is likely to compound the issue as it could require more lithium than is currently produced for the entire global market.
In the absence of unified regulation in this area, pockets of self-imposed requirements and best practices are emerging. Some companies have begun screening cargo, seeking proper certification from manufacturers before approving transportation, and imposing penalties for mis-declared dangerous goods. Some only accept electric vehicles with a desired state of charge of 50% or lower, and others have installed Co2 fire suppression systems.
Insurers have long warned of the potential dangers of lithium-ion batteries that are not handled, stored and transported according to manufacturers’ instructions. The shipping industry must fully acknowledge this emerging risk and improve fire prevention training, protection, mitigation and contingency planning.
In March, the International Maritime Organization (IMO) Sub-Committee on Ship Systems and Equipment (SSE) endorsed a roadmap and goal-based approach for developing fire safety systems and arrangements to reduce the risk of fire ships carrying electric vehicles. These will be submitted to the Maritime Safety Committee (MSC 109) in December 2024 for consideration and endorsement. It is without a doubt that this work will be of use to the industry, however, it may take a considerable amount of time to yield any tangible results.
Nevertheless, the insurance market has rapidly adapted to better understand lithium-ion battery risks and is now more willing to provide terms for them. However, insurers are still eager to thoroughly understand the exposure before making any commitments.
Gallagher Specialty, with its access to the London market, is well-positioned to help source innovative cover for the cargo sector to help address the unique challenges the Cargo industry faces, including offering risk consultancy for large and complex risks.
The Walbrook Building 25 Walbrook London, EC4N 8AW
Let's talk
Alec Russell
Executive Director
Alec_Russell@ajg.com
Arthur J. Gallagher (UK) Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: The Walbrook Building, 25 Walbrook, London EC4N 8AW. Registered in England and Wales. Company Number: 119013.