As you may have read or seen in the national news, a container ship has been seized in the Middle East by the Iranian Revolutionary Guards. The MSC Aries has a capacity of around 15000 containers and it is reported just 21 of these have any connection with Israel and it is on this basis that the ship and its crew have been and remain detained. It follows that a considerable percentage of container ships at sea will have a connection to Israel one way or another if drilled down to this percentage of cargo.
Clearly this latest seizure, the 1st of a container ship makes the situation in the Red Sea and Gulf of Aden much worse and risks container traffic in the area being restricted or stopped altogether in the very near future.
Why does a container ship being seized in the Middle East affect my imports to the UK when I buy from China & India?
The Middle East is a key hub for container ships with many stopping on their route from the Far East or Indian sub-continent, as they head to Europe. Container ships do not normally travel directly from the Far East or Indian sub-continent to Europe, so these regional hubs play a very important role in container shipping operating efficiently.
Check your cargo insurance
The world seems to be becoming a more uncertain place and we, therefore, recommend you review your in-transit cargo insurance. What may have been a settled part of the world can quickly become classified as a war zone, or an area susceptible to terrorist attacks or seizures. If your cargo insurance does not cover war zones or terrorism attacks, for example, you may find yourselves uninsured, and in a position where you have to write off the value of what you have inside a container on a seized ship, especially if it stays seized for many months. There is invariably no claim to be made against the shipping line in these circumstances as it is most likely the seizure is not their fault. For the same reasons, if you rely on your supplier arranging marine insurance, you may find to your cost they have bought a policy with minimal cover, as this will have had the cheapest premium, and it is unlikely under these circumstances that you receive a payout if a ship were to be seized, damaged or destroyed.
Is all this going to affect container freight rates?
In short, we do not know. However, we know that any actions that push up a shipping line’s costs, by re-routing, or needing more ships at sea, soon feed through to higher freight prices fairly quickly.
What next?
It has been widely reported that an Iranian Revolutionary Guards commander that they plan to target ships in the Mediterranean Sea, noting that groups in Algeria are said to have received attack drones from Iran. Any restriction on shipping flow in the Mediterranean would have further detrimental effects on world trade by container.
If you want to review shipping options in the light of latest events, K&L Freight can be contacted at 01606 272880 or mail [email protected]
