Kuala Lumpur, 25 September 2001(Business Times) - PALM oil shippers areexpected to face higher freight rates and also a "war risk" insurancepremium for shipments to Pakistan and the neighbouring areas on fears ofpossible US military action in Afghanistan.

The new freight rates will be decided at a meeting on September 27 betweenshipowners and insurance companies, an industry source told Business Timesin Kuala Lumpur yesterday.

"The charges are expected to rise by between US$1.50 (US$1 = RM3.80) andUS$3 a tonne, from the current US$28 to US$35 range," he said, which meanseach 1,000 tonnes of the commodity will cost US$31,000-US$38,000 to shipcompared to US$28,000-US$35,000 previously.

Each month, between six and 10 ships ferry an average of 100,000 tonnes ofMalaysian palm oil to Pakistan.

The expected rate increase follows terrorist attacks in the US onSeptember 11 and the mobilisation of US military forces in West Asia, inthe Indian Ocean and Arabian Sea, the only route for palm oil shipments toPakistan.

The US has accused Afghanistan's ruling Taliban of harbouring fugitiveguerilla Osama bin Laden whom the White House says is the prime suspect inthe attacks.Pakistan in turn has given US permission to use its airspace and ports forany offensive against targets in Afghanistan.“The area will be a war zone and any additional costs in shipping wouldlikely be passed on to the buyers,” said the source.Insurance companies will meanwhile also be coming up with a new structureof premiums, he said.“It will involve adjustments in quotes for both the cargo and the shipitself.”Some companies might even stop providing cover on some routes altogether,on account of the heightened uncertainties in the region.“Remember that they are the same companies which also insure planes andaviation services that have been badly hurt by the fallout,” the sourcesaid.It is not clear whether the hike will also involve other shipments besidespalm oil.The development does not augur well for the palm oil industry, an analystsaid.“Buyers know when there is a stock overhang and prices will fall.“There may also be defaults in payments and deliveries... exports willsuffer,” he said.Pakistan has for years consistently bought about one million tonnes ofpalm oil from Malaysia annually. Only India, China and the European Unionare bigger customers.