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Malacca threat raises cost stakes for shippers |
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Saturday, 06 March 2010 |
 Heightened fears of an attack on oil tankers transiting the Strait of Malacca, a key shipping lane for world trade, could lead to higher insurance costs for shippers and may lead to longer journey times, analysts say.
The Singapore Navy believes a group is planning attacks on oil tankers
in the Strait, a Singapore shipping body warned on Thursday.
John Dalby, chief executive of maritime security company MRM, which
provides risk assesments to companies, said ships diverting could be one
of the major risks in the event of an attack.
"The damaging part is not just a potential oil spill or the loss of a
crew it's the knock on effect of owners even thinking about re-routing
their vessels," he said. "The economic backlash would be very, very
significant."
Up to 80 percent of China's oil imports and 30 percent of its iron ore
imports, and 90 percent of Japan's crude oil imports, pass through the
Strait.
"Longer term, if there is a big incident, it will encourage, if not
force, some of the crude shippers to use the Sunda and Banda straits in
preference to Malacca Straits," Al Troner, president of Houston-based
Asia Pacific Energy Consulting, said.
Sunda and Banda lie south of Malacca and passing via them would add at
least 900 nautical miles or three days sailing time from the Middle East
Gulf to Japan, shippers say.
Industry group Intertanko, whose members own the majority of the world's
tanker fleet, on Thursday said it had advised its members to take
"extra care" when passing through the area.
Shipping groups including Denmark's Maersk Tankers said they had
increased vigilance on their vessels which included passing through the
Strait at the maximum speed and posting more lookouts on a vessel's
bridge.
"I don't think we would change the route. Basically the area is
dangerous, so we have been taking precautions," a spokeswoman for
Japan's second-biggest shipper Mitsui O.S.K. Lines Ltd said.
TERROR RIDER
One European shipping analyst said if the risks escalated insurance
costs for tanker owners would rise, adding that the industry already
faced tough conditions due to weak oil demand.
While daily crude tanker earnings on the benchmark Middle East Gulf to
Japan route have risen from lows last year to around $37,000 this week
they are still below their peak of over $200,000 a day in 2007 before
the economic downturn.
"The insurance industry will certainly miss no occasion to reap a
windfall profit by adding the requirement of a 'terrorism rider' much
like the 'piracy rider' that has made it considerably more money than it
has had to pay in ransoms off the coast of Somalia," said J. Peter
Pham, an adviser on strategic matters to U.S. and European governments.
Piracy in the Malacca Strait became so serious a decade ago that in 2005
the Joint War Committee of the Lloyd's Market Association added the
area to its list of war risk zones, sending premiums sharply higher. The
decision was reversed in 2006 following lobbying from Singapore,
Malaysia and Indonesia.
Neil Roberts, secretary of the Joint War Committee, told Reuters there
was no reason for it to meet at this stage.
"In the short term there is no effect. Trade continues as normal.
Underwriters are keeping a careful eye on the situation," he said.
Source: Reuters
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