Persian Gulf grain cargoes hit by vessel war risk premium
Grain cargoes travelling to the Persian Gulf have been caught up in heightened Middle Eastern political tensions, with the cost of voyages to the region rising as shippers increase their risk premium for travelling to the region.
The cost of shipping a panamax of barley from Ukraine’s deepwater ports to the Persian Gulf has increased $1.50/mt over the past week to $28-29/mt, according to freight analytical agency ISM.
That increase was on show at SAGO’s barley tender that closed over the weekend, with average delivered costs to Saudi Arabia’s Gulf ports almost $11.50/mt higher than its Red Sea ports, up from $8.50/mt at its tender six weeks before.
The increase comes after attacks on two civilian oil tankers on June 13 in the Strait of Hormuz and a month after a similar attack on a vessel off the coast of Fujairah.
The US blamed Iran for the June attack – a charge the country’s government denies – with tensions between Washington and Tehran ratchetting up as result.
As a result of the increased geopolitical risk in the region, shippers are increasing their costs or outright refusing to travel to the region.
At least part of the cost comes from higher insurance premiums, with the cost of insuring a panamax cargo heading to the region now at $80,000-100,000 according to ISM.
“As a result of increasing tension in the Persian Gulf area following recent attacks on two tankers, War Risk underwriters are charging additional premiums (AP) for calls to the Arabian Gulf/Gulf of Oman,” shipping association Bimco announced last week to members.
“Some underwriters are charging a flat rate for all tonnage operating in the area, while others are differentiating based on the type of tonnage, flag and port of call,” Bimco said.
Cargoes traveling to the Persian Gulf had been subject to an additional war insurance premium prior to the June 13 attack, although sources told Agricensus that all vessels travelling to the Arabian Peninsula may now be subject to this cost.
Bloomberg reported on Monday that the cost of insuring oil cargoes traversing the Strait of Hormuz has increased tenfold since the start of the year.
An additional factor is ship owners’ unwillingness to send vessels to an area where civilian vessels have been targeted by attacks in recent weeks.
“(The premium) is in place because there are (fewer) ships willing to go there … You have to pay extra to secure an owner’s interest,” a freight broker to Agricensus on Tuesday.
While attacks on civilian vessels in the region have focussed on higher value, more symbolic oil cargoes, dry bulk traffic has also been targeted.
In May 2018, a Turkish-flagged vessel carrying Russian wheat was struck by a missile off the coast of Yemen.
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