Cargo Shipping Rates Climb as Battle Rages : Transportation: Some foreign airlines and shipowners are switching to longer routes to avoid the Middle East.


The Persian Gulf War is increasingly being felt by the global cargo transport system as shock waves from the outbreak of hostilities wreak havoc with air and sea schedules and boost shipping costs around the world.

The ripple effects go far beyond the higher war-risk insurance premiums imposed on oil tankers during the early days of the gulf crisis, or the tightened availability of air-cargo space because of the U.S. military buildup.

With the eruption of actual fighting, some foreign airlines and shipowners are refusing to go near the Mideast, adding hours--or, in the case of ships, a full week--to the typical journey between Europe and Asia.

In the United States, dramatically heightened security measures as a result of the threat of terrorism are also taking a toll.


“We see an impact in the availability of air freighters and delays from enhanced security at airports,” said Robert Stephens, chief executive of Emulex Corp., a maker of computer components in Costa Mesa.

“It’s hard to get international goods out of the country through LAX because of the security,” Stephens added.

As a result, Emulex is adding a week to the delivery time for computer components being shipped to Western Europe and two weeks for products bound for the Middle East. Normally, the products can be shipped to Europe in three days.

In Hong Kong, cargo shippers are howling in protest at surcharges of up to 70 cents a pound for Europe-bound cargo by airlines which can no longer overfly the Mideast.


The airlines blame the new rates, which are 20% to 39% higher, on longer routes over the North Pole, which add time and reduce cargo-carrying capacity by as much as 40%.

Similarly, certain seaborne cargo between Europe and Asia is being subjected to delays of as much as a week because some shipowners are refusing to transit the Suez Canal due to high insurance premiums and perceived dangers. Instead, they are sending their vessels around the Cape of Good Hope.

“The diversion is necessary for the safety of crew members and to avoid paying high insurance charges,” said a spokesman for Neptune Orient Lines, Singapore’s national carrier.

The result has been upward pressure on cargo rates around the world at the same time that shipowners are imposing surcharges to reflect higher fuel and insurance costs.

For example, the day after war broke out, the Far Eastern Freight Conference, a group of 30 shippers, instituted a $300 surcharge per 20-foot container--a hike of 25%.

The hikes are only partially offset by lower war-risk insurance premiums as Lloyd’s of London underwriters become increasingly convinced that commercial shipping will be spared in the conflict.

Crew members going into the Persian Gulf are demanding and receiving hazardous duty bonuses of 200%. Some merchant seamen--including Indians and Japanese--are refusing to sail into the area at all. The Japanese seamen’s stance reportedly means Japan’s stocks of liquefied petroleum gas--used for cooking and heating and to power taxis and electric power plants--for now are going unreplenished.

The new transportation uncertainties are also throwing a monkey wrench into the so-called just-in-time shipping systems that many U.S. companies adopted during the 1980s.


For example, Emulex--at considerable cost--is being forced to bolster inventories in Europe in anticipation of demand, rather than build products and ship them on a just-in-time basis. Just-in-time systems, Emulex officials note, depend upon reliable shipping schedules.

Ernie Hilbruner, vice president for operations of Emulex, said the collapse of Eastern Airlines and the cancellation of many international flights by such carriers as Pan American World Airways and Trans World Airlines because of low travel demand has exacerbated the problem.

The situation is worsened by the military’s decision to commandeer more than 180 civilian planes to ship soldiers and their gear to the Persian Gulf.

“Put all that together and I have a heck of a time delivering a product,” Hilbruner said. “There is a big line in getting something out of LAX. I think the wait will get worse because the demand for freight won’t slacken. A bomb scare or something that tightens security even more would make it worse.”

Robert J. Blair, spokesman for Western Digital Corp. in Irvine, said the company’s business has also been affected by shipping delays.

In Italy, where the company sells disk drives and other computer components to manufacturers, Alitalia requires precise statements with product descriptions for each pallet of equipment. As a result, shipments are delayed two to five days, Blair said.

“It affects us even in areas where we are a well-known supplier,” Blair said. “You just don’t ask for overnight shipments anymore.”

Victor F. Zonana reported from New York and Dean Takahashi reported from Orange County.