Electrification of the global economy continues to bear risks for the shipping industry and supply chains, according to Allianz Commercial’s latest Safety and Shipping Review.
Electrification of the global economy is driving huge demand for lithium-ion batteries, from electric cars and e-bikes to industrial scale battery storage systems. The global battery market is forecast to reach US$322bn by 2030, more than double its value in 2024, driven by growing demand for electric vehicles and battery storage systems required to support the transition to renewable energy.
According to Captain Rahul Khanna, Global Head of Marine Risk Consulting, Allianz Commercial, insurers have seen large losses from lithium-ion batteries; the past year has seen major fires at battery manufacturing and recycling facilities that have resulted in significant activity.
While not a direct marine loss, such incidents demonstrate the development of battery usage and the potential future risks for the industry, and electrification continues to bear risks for the shipping industry Khanna explained.
Recent fires involving lithium-ion batteries
- In January 2025, a fire destroyed one of the world’s largest lithium-ion battery storage facilities in California, leading to the evacuation of over 1,000 residents. A spokesperson stated that the facility’s fire mitigation system failed to work as designed.
- Just months earlier, a fire broke out at one of the world’s largest lithium-ion battery recycling facilities in Missouri, despite the use of sophisticated fire suppression systems.
- In 2024, a major fire occurred at a lithium-ion manufacturing plant in South Korea.
Lithium-ion battery-related incidents have also affected the maritime and logistics industry:
- On September 26, 2024, the ports of Los Angeles and Long Beach were forced to shut container terminals after a truck carrying lithium-ion batteries overturned and exploded on a port access road.
- Shortly before that, on 23 September, a container transporting lithium-ion batteries caught fire on the dock at the port of Montreal, Canada.
Lithium-ion battery risks continue to develop in the electrification age
Khanna explained that considerable work is ongoing to understand these risks and how they could be mitigated. For example, through fire detection and prevention measures, as well as determining the best approaches to tackle battery fires. In such an instance, various organizations joined forces in 2023 to publish a report on transporting batteries inside containers titled “Lithium-Ion Batteries in Containers Guidelines”. Furthermore, also in 2023, the International Union of Marine Insurance (IUMI) has released a set of recommendations regarding the safe carriage of electric vehicles (EVs).
Generally, the year of 2023 was pivotal for highlighting the danger of lithium battery fires, as exemplified by the Fremantle Highway fire. This major maritime incident, which occurred in July 2023 aboard a cargo ship carrying thousands of vehicles including many electric vehicles, underscored the serious risks posed by lithium-ion batteries.
The fire is believed to have started due to a malfunction or thermal runaway in one of the electric vehicle batteries, leading to a devastating blaze that resulted in the loss of a crew member and the evacuation of the ship. This event brought global attention to the challenges of safely transporting lithium battery-powered vehicles and emphasized the urgent need for improved fire prevention and containment measures in the industry.
Captain Randy Lund, Senior Marine Risk Consultant at Allianz Commercial, observed that the latest car carriers are capable of transporting as many as 10,000 electric vehicles. He warned that if something were to go wrong, it would involve substantial value, as well as significant risks to the environment and the safety of seafarers.
Lund also pointed out that with a significant increase in the demand for battery energy storage systems (BESS), another emerging risk. According to Lund, the transportation of such units over sea and land adds another layer of complexity to battery-related risks. Although these systems were inherently more stable, he noted that they still pose a considerable risk in the event of a fire, particularly because they can store large amounts of energy.
“Insurers are aware of the risks of lithium-ion batteries and do not underwrite these risks lightly; we have developed risk controls and can work with clients to help them improve the risks,” said Lund.
During the 2023 SAFETY4SEA Limassol Forum, Taslim Imad, Manager Loss Prevention Department at Steamship Mutual, gave a presentation on safety measures of carriage and stowage of electric vehicles, from a P&I perspective. According to Imad, the lack of relevant regulation poses a significant challenge and even if a new regulation is agreed, it will take years to enter into force.