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Crisis Makes Shipping Market Even More Volatile Graphic

August 31, 1990

OSLO, Norway (AP) _ The Persian Gulf crisis has not been kind to the shipping industry, whose stocks have tumbled on fears tankers will be idled as insurance companies impose war-zone premiums and sailors demand hazardous duty pay.

Analysts in world shipping capitals say the market, complex and highly sensitive at best, now also is confused. In some cases, it’s nearing panic.

″We can’t predict anything,″ said Michael Kokkinis, president of the Greek Shipbrokers Association. ″Everyone is in a state of alert, both those who are buying and those who are selling ships. People are waiting.″

Stock market shipping indexes have slumped about 25 percent worldwide since Iraq invaded Kuwait on Aug. 2, said a spokesman for Lloyd’s List International in London.

The spokesman, who asked not to be named, said Norwegian and U.S. shipping companies have been hit hardest. An Oslo business newspaper reported that some Norwegians saw their shipping fortunes halved on paper within two weeks of the invasion.

Other Norwegian reports last week predicted a 30 percent decline in tanker rates. Loukas Hadjioannou, the Greek owner of the world’s largest independent tanker fleet, said 30 percent of all tankers could be laid up by the crisis.

″The main thing that this crisis has done is once again stress the volatility of the shipping market, how open it is to outside influences,″ said David Glass, editor of Naftiliaki, a shipping magazine in Piraeus, Greece.

London experts said 60 ships, mostly tankers, were awaiting orders near the Persian Gulf late last week at considerable cost to owners. But they said there was some increase in chartering, where ships are hired for specific voyages.

Compounding a decline in tanker activity are increasing costs for shipping companies because of the dangers caused by the crisis.

Crews want cash bonuses for sailing in the Gulf. Greek shipowners and the Panhellenic Seamen’s Federation have agreed to define the Gulf as a danger zone.

Insurance costs have increased as much as tenfold, though more often by three times, for ships in high-risk Gulf areas, according to Norwegian reports.

Jane Vidler of Lloyd’s Insurance in London said war insurance rates for ships have been raised three times since Aug. 2. But the highest premiums are still just one-tenth of the 7.5 percent of a ship’s value some owners paid during the 1980-88 Iran-Iraq war.

″The current situation in the Middle East has led to natural fears and a good deal of short-term inability to act,″ said Jarle Hammer, an analyst with Fearnlet AS in Oslo. ″Some are clearly on the verge of panic, panic built on uncertainty.

Anxiety has pushed the paper value of Norwegian ships down by $1.3 billion, or 19 percent, since Aug. 1, according to Oslo’s stock exchange. Mark Jenkins, senior consultant at Lloyd’s Maritime Information Service, said losses reflect the jittery tone of the world stock market.

″If this crisis goes on we’ll be in trouble,″ Glass said. ″Because the developed nations will enter a recession and they will have a smaller demand for oil.″

He said ships that can carry either oil or dry cargo then could enter the dry cargo market, causing problems there. Also, expensive tankers ordered a few years ago are being delivered now and ″those who ordered them are going to be in trouble,″ Glass said.

The shipping industry expects some relief as other nations, including some OPEC members, are expected to replenish up to 90 percent of the 4 million barrels of Iraqi and Kuwaiti crude lost to the market.

Also, some tankers have won longer contracts to sail farther for alternate oil cargoes because Turkey closed an overland pipeline from Iraq.

Uncertain oil supplies could increase demand for coal cargoes from stable suppliers such as the United States and Australia. And higher crude prices would stimulate offshore oil exploration.

Eventually, though, the size of the world’s tanker fleet could decline. Higher energy costs tend to increase scrap metal values because reclaiming scrap uses less power than producing steel from ore, which could encourage some shipowners to retire vessels.

Other analysts said a depressed market could encourage shipowners to try to sell a large number of ships. If they do, buyers could be the Greeks, known for buying second-hand ships when prices are down and selling when times are good, analysts said.

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