Attack on ship off India's west coast can raise war risk premiums as security tightens

India has deployed missile destroyers in the Arabian Sea following the drone attack on a chemicals tanker off its west coast as market participants cautioned Dec. 26 that previously-stable war risk premiums could potentially rise.

"So far, the additional war risk premia in the Persian Gulf and the Arabian Sea is stable. It is only in the Gulf of Aden and adjoining region of the Red Sea that costs have gone up," said a chartering executive with a global commodities trading company.

However, if the area of attacks widen, it would push up the Additional War Risk Premiums elsewhere as well, the executive said. Charterers are already reeling under rising freight even as the prospect of a further increase stares at them, with the longer route via the Cape of Good Hope now being used more frequently to move cargoes from the Persian Gulf to Europe.

The LR1 freight on the benchmark Persian Gulf-North Asia routes has risen by w75 so far this month, with Platts assessing Japan deliveries at w193 Dec. 22, basis 55,000 mt, a level not seen since early May, according to S&P Global Commodity Insights data.

The Liberia-flagged tanker Chem Pluto carrying 21 Indians and one Vietnamese crew was attacked over the weekend by a suspected drone but there were no casualties.

An analysis of the area of attack and debris found on the ship point toward a drone attack but further forensic and technical analysis is needed, an Indian Navy spokesperson told S&P Global.

A joint investigation has already commenced on completion of the analysis of a navy team handling explosive ordnance, he said.

The tanker is now anchored near Mumbai port, according to brokers. The ship is operated by Ace Quantum Chemical Tankers, a company linked to Israeli businessman Idan Ofer, they said. Ofer could not be immediately reached for comment.

The ship would be inspected by relevant authorities before a ship-to-ship transfer of cargo takes place. Thereafter, it will go for dry docking for repairs, the navy spokesperson said. The damages were caused by a fire onboard, brokers tracking the developments said.

The ship was attacked around 200 nautical miles off India's west coast on its way to New Mangalore from Jubail.

Steps up security

The Indian Navy has deployed three missile destroyers in the region for deterrence, the spokesperson said.

A long-range maritime reconnaissance P8I aircraft has also been asked to remain alert and maintain "domain awareness," he said.

India's Western Naval Command is closely coordinating with the Coast Guard.

This is among the first reported attacks in recent times in the Arabian Sea. In February, Zodiac Maritime's products tanker, the Campo Square, was damaged by an airborne object while passing through the Arabian Sea but was not carrying any cargo. Most such attacks have been taking place in the Red Sea where Yemen-based Houthi rebels are active and have openly declared their intention of targeting ships heading to Israel, or having links to it. However, several ships that do not fall in this category have also been attacked.

A Gabon-flagged oil tanker, the Sai Baba, on its way to India with 25 crew members, all of them Indians, also came under drone attack in the Red Sea Dec. 24, along with another Norwegian-flagged ship.

The US has established a naval coalition to protect the commercially critical shipping lanes along the Red Sea, which now has at least 20 member countries.