INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

ASSAULT ON SHIPPING RATES

THE ISRAEL-LEBANON flare-up and the short supply of shipping tonnage are making life difficult for India Inc, just when it grapples with hardening prices of oil and LNG.

Shipping charter/freight rates have soared 30-40% in two months, and could move up on higher insurance premia, additional ship management expenses and inadequate vessel supply.

Industry officials said the charter/freight rates are choppy that a minor escalation of tension in the Middle East is tilting the balance.

The ongoing Lebanon bombing by Israel is indeed bad news for shipping. While a few ports such as Beirut have been shut down, additional war risk premia have been introduced on nearby Mediterranean ports. Underwriters are taking a hard look at the extra war-risk premia in the Mediterranean and Black Sea areas. This may well trigger higher freight rates for these areas.

“If Suez Canal becomes part of the war-zone, insurance premium will go up on hundreds of ships passing through the canal, directly impacting the freight rates. Though India 's bilateral trade with countries like Egypt , Israel , Syria and Jordan are not large, most of its crude and container carriers pass through the Red Sea , Suez Canal and the Mediterranean Sea . These vessels carry India 's trade with its major partn e r s like Europe and North America ,” said RK Mitra, director (bulk carrier and tanker division), Shipping Corporation of India .

Officials said the additional security on ships and change in ports of call due to the conflict would raise operational expenses.