SINGAPORE (February 22 2003) : Pakistan's commodity importers are being asked to pay war-risk premiums for cargoes that are due to arrive in coming weeks as the threat of a US-led attack on Iraq looms, a leading Pakistani shipping industry official said.
This, coupled with galloping freight rates, is hitting margins of commodity importers in the South Asian nation, Omar Najib Balagamwala, Trading Director of Karachi-based Seatrade Pvt Ltd, told Reuters late on Thursday.
“The contracts were signed in November for February and March deliveries, and there was no element of war-risk premiums then. It's sad but true that the sellers are now demanding war risk premiums,” he said.
Balagamwala said a Canadian canola shipment, some rapeseed from Europe, coal from China, soyabeans from Argentina and palm oil shipments from Malaysia were in the pipeline.
“We cannot afford to delay the shipment of some of these cargoes to avoid the war-risk premiums. For instance, the coal shipments have to come in immediately as the cement companies are badly in need of those,” he said.
Officials said the United States and Britain had more than 150,000 troops in the Gulf region.
The US Defence Secretary, Donald Rumsfeld, said on Thursday the build-up had reached the point where forces were ready to invade Iraq if the order was given.
Balagamwala said Pakistani commodity importers were also facing hurdles on new import deals.
“For future contracts, sellers are insisting on a clause, saying any additional war-risk premiums above the basis will be on the buyers' account. High freight rates also hurt when you are already paying 30 cents on a one-dollar margin,” he said.
Earlier this week, ship brokers said that Panamax dry bulk rates for the benchmark US Gulf to Japan would probably hit seven-year highs, supported by higher bunker fuel prices and brisk demand for grains and minerals.
Modern Panamax voyage rates for the benchmark US Gulf to Japan route were indicated at about 28 dollar a tonne for shipment in March, against 27 dollar a week earlier.
On commodity shipments to Iraq from Pakistan, Balagamwala said a Pakistani rice cargo had left for Iraq recently, while no wheat shipments were scheduled.
“In any case, we did not have a very good experience with Iraq earlier on wheat exports and the country's wheat is currently out-priced,” Balagamwala said.
Last year, Iraq rejected some Pakistani and Indian wheat cargoes on quality issues.
India renewed its exports to Iraq recently.
Traders said the Iraqi government was in talks with the Asian exporters to buy 50,000 tonnes of soft wheat.-Reuters