Transportation & Logistics Analysis

Le Havre – Dubai: Freight rate has dropped slightly, but for how long will this go on?

July 24 2019

The maritime freight rates between Le Havre and Dubai are dropping slightly (Jebel Ali). However, this is a situation that may not last much longer. The potential is definitely there, but ongoing tensions are running high in the area.

It is easy to find available space on routes from Europe to Dubai, this destination is offered by the three large alliances for maritime container transport. The port of Jebel Ali is a vital access point for the arrival of goods for all the Gulf area and, thanks to its status as a free economic zone, it is capable of capturing the flow to East Africa by cabotage and to a lesser degree by land to the Maghreb.

As of today, there has been no suspension of services by carriers to this strategic port situated in the middle of the Strait of Hormuz, despite a very turbulent situation due to the political unrest between the USA and Iran linked to oil.

Capture d’écran 2019-07-24 à 16.16.24Historical view on average rates in Port to Port (with THC) estimated by Upply over the past 24 months – July 24th, 2019

War Risk Surcharges

Nevertheless, if the tension does not abate quickly in this strategic area, the companies will have to substantially introduce War Risk Surcharges, or similar, to the cost of transport of goods. This is to compensate for the rise in insurance premiums when travelling through the strait during such a period of high tension.

Temporary surcharges of between 100 and 200 USD for a 40ft container are likely, this will also be applicable to direct contracts with shippers which are not totally exonerated from this situation which is, by definition, unpredictable.

As with all surcharges, it is always possible to negotiate. However, a total waiver will be difficult to obtain under the circumstances.

At the beginning of the 50’s the zone around Hormuz had already been clearly identified as being a strategically important geo-economic point in terms of major global stability. Seeing as it is the time to choose a book to take on holiday with you, the Captain strongly recommends, on the subject, to read or reread The Secret of The Swordfish by Edgar P. Jacobs.

Captain Upply
Photo credit: Pexels

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Expert in Ocean shipping for 25 years, Jerome puts all his knowledge of the industry to contribution for Upply. Ship captain at heart, he has written the English-French Lexicon of Containerized Shipping (Paris: CELSE, 2001).
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