India’s Shipping Ministry has expressed concerns over the escalation of tension in the West Asian region, triggered by Iran’s massive missile attack on Israel on Saturday, leading to possible “interlinked incidents” such as piracy and an estimated 15-30 per cent increase in freight costs in India’s key shipping route.
In view of the changed circumstances in the region, the Ministry has come out with advisories that include varied reporting protocols for ships coming into Indian waters, mandatory security drills, and an increased presence of the Navy, among others, sources said.
The “maritime sensitive regions” identified by the government include the Persian Gulf, Strait of Hormuz, Gulf of Oman, Arabian Sea, Gulf of Aden, Bal-al-Mandeb Strait, Red Sea, Somali Basin, and the `Arabian Sea region’.
According to an official, the Strait of Hormuz, which connects the Persian Gulf to the Gulf of Oman in the east, is seen as a top strategic choke point, and diversion through the Cape of Good Hope (an alternative route) is time-consuming and pushes up costs.
The official said the escalation in tension in the West Asia and interlinked incidents were of concern. “In case of a security incident, the communication protocol laid out requires contacting the nearest Navy vessel or international warship,” he said. Other protocols include informing the UK Maritime Trade Operations (UKMTO) and other applicable agencies and organisations relevant to the reporting of the incident.
“In light of the prevailing security concerns, it is advised to conduct comprehensive ship-shore security drills encompassing all pertinent scenarios, including but not limited to piracy and loitering munitions threats. Additionally, Ship Security Alert System (SSAS) testing may be undertaken.” the advisory accessed by businessline mentioned.
It also lays down that any incident of suspicious nature “not affecting the vessel” should also be reported.
There will be an impact on freight rates primarily because of increased cost due to the rerouting of vessels, the official pointed out There will also be increased streaming run-time, resulting in delayed scheduling, cost rise due to deployment of armed guards, and a rise in war risk premium, he added
“Increased PnI (protection and indemnity) insurance costs are a few of the aspects,” the official explained.
Freight Rates May Inch Up
Freight rates are already up on a y-o-y basis because of the Red Sea crisis after the Yemen-based Houthis started attacking shipments passing through the region.
Drewry’s pegged the World Container Index at $2795 (40 foot), a decline of 1 per cent w-o-w on April 11 and up 63 per cent y-o-y (from $1710, the April 20, 2023 index).
Statista Research said container freight rates slumped to their lowest on October 26, with the rate for a 40-foot container at $1342. Since then, rates have been up, hitting over $3,900 per container in February 2024, the highest, before decreasing slightly in March to $3,100-3,200 levels.
“There was some stability in rates as the Houthi rebels slowed down attacks in the last few weeks. But recent tensions will lead to further rise across specific routes.,” the official said.