May 30, 2012 / 1:47 PM / 5 years ago

Turmoil hitting ship container trade to Syria

* Worries over ships stopped for weapons searches

* Growing risks in Syria adding to slower trade

By Jonathan Saul

LONDON, May 26 (Reuters) - Growing shipping costs and risks are contributing to slowing ship container trade to Syria as the country struggles with Western sanctions and worsening violence, trade sources say.

The European Union, the United States and other Western countries have imposed sanctions on President Bashar al-Assad's government in response to his bloody crackdown on a 14-month revolt that has cost more than 9,000 lives.

While those sanctions are not targeted at food, a financing freeze has hurt Syria's ability to import foodstuffs including grain and sugar on ships. The EU has also restricted the export of luxury products to Syria.

Trade sources say the growing turmoil has weighed on container trade, carrying household items including canned foods and clothing.

The premium on a cost and freight basis to transport a cargo of sugar to Syria using a container ship has jumped to $100 a tonne from $75 a tonne less than two weeks ago, one trade source said.

"There is no doubt that the cost of transporting goods using containers has gone up in the past two weeks and part of that is done to higher insurance which has happened over time," the source said.

London's marine insurance market last year added Syria to a list of areas deemed high risk for merchant vessels.

Assad has faced international outrage over the massacre last week of 100 people in the town of Houla. The Syrian government has blamed Islamist militants for the killings in Houla.

Shipping sources said the possibility of merchant vessels, especially container ships, being stopped by foreign authorities looking for weapons bound for either Assad or the rebels was also weighing on trade.

Earlier this month Lebanese authorities seized a consignment of weapons on board a container ship heading to the Lebanese port of Tripoli. The weapons could have been transported by land from Tripoli to Syrian rebels.

"There is this growing hassle factor of potentially having a ship stopped due to the possibility of weapons smuggling, which is also having an effect," a European trade source said.

Consultancy Alphaliner, citing the most recent data from third party sources, said container volumes at Latakia, Syria's biggest container port, fell just over 10 percent year-on-year in 2011 to 524,614 TEUs (twenty foot equivalent units) from 586,283 TEUs in 2010. Container trade is measured in TEUs.

"In smaller ports (in countries like Syria) which handle half a million containers per year, volumes are more volatile," said Jan Tiedemann, a shipping analyst with consultancy Alphaliner.

Container volumes at Latakia in the first quarter of 2012 reached 118,820 TEUs, according to data on the port's website. Separately, port data for the January to November 2011 period showed volumes reached 477,359 TEUs. There was no data available for the smaller Tartous port or further data for Latakia. Port officials could not be immediately reached for further comment.

LINERS SCALE BACK SERVICES

Maersk Line, the world's biggest container shipping company, said it continued to call at Latakia but had stopped calls to Tartous.

"The reason is cost saving, optimising the network," a Maersk spokesman said. Earlier this month, Danish shipping and oil group A.P. Moller-Maersk, said it expected a "negative up to neutral result" this year for its container shipping arm as it contends with a freight market slump.

Smaller liner company Hamburg Sud said it had also dropped its service to Tartous and was only calling at Latakia. "In the long run we're planning to include a service to Tartous to our network again," a spokesman said.

Mediterranean Shipping Co and CMA CGM, the world's second- and third-largest ship container firms respectively, said they both continued to call at Tartous and Latakia.

CMA said all of its Syria trade complied with sanctions.

"CMA CGM is continuing to call on a weekly basis at the ports of Latakia and Tartous in Syria using its own ships, while respecting rules imposed by the United Nations, the European Union and OFAC (U.S. Treasury)," the company said. (Additional reporting by Gus Trompiz in Paris and Maha El Dahan in Abu Dhabi; Editing by Veronica Brown and Helen Massy-Beresford)

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