Shipping rates jolt following Strait of Hormuz tanker attacks
Fear of escalating conflict has led to high insurance premiums and an uptick in safety measures
Shipping rates have skyrocketing following the latest tanker attacks on 13 June which saw two tankers targeted near the Strait of Hormuz. For ship owners, this means increased risks and costs attached to trading in the region.
Bimco, the world's largest international shipping association, wrote in a statement to its members that the uptick in costs come from added safety measures as well as higher insurance premiums, which saw a sharp increase following the attacks. Some of the safety measures include sailing more quickly through the Strait of Hormuz, and avoiding the area at night, when watchkeeping is more difficult.
However, it noted that some freight rates have remained stable. "Although spot freight rates for crude oil tankers out of the Arabian Gulf have risen sharply, those for LR2 tankers carrying clean oil products like naphtha, have remained much more stable," the statement wrote. "Spot freight rates for an LR2 carrying half a million barrels of naphtha condensate from the Middle East Gulf to Japan, rose by only 4% between 13 and 20 June 2019."
“The unchanged rates for oil product tankers compared with the jump in freight rates for crude oil tankers, illustrate the differences between the two markets as well as the effects of sentiment on crude oil freight rates,” said BIMCO’s chief shipping analyst, Peter Sand.
Despite concerns about safety, Bimco noted that most tanker owners continue to trade in the area.
“The vast majority of tanker owners are more or less going about with business as usual, although they have ratcheted up their safety and security precautions when trading their ships in the Arabian Gulf,” Sand said.
Approximately one-fifth of global oil consumption travels through the Strait of Hormuz. Bimco estimates that 49% of crude transported by sea travels through this strategic chokepoint, or around 19.7mn barrels
“To avoid major disruption, it is vital for global energy trade that the Strait of Hormuz remains accessible and safe for ships to sail through," said Sand. "As long as tensions aren’t escalated the attacks are unlikely to have a more profound effect. However, the risks that the conflict will escalate remains very present and a great worry to everyone involved with oil trading in the region."