Freight costs have nearly tripled, Red Sea instability adding to woes of EU tax – Maritime Forum CEO

Last Updated on Monday, 12 February, 2024 at 4:24 pm by Andre Camilleri

It is currently difficult to truly assess the exact impacts of the recently implemented EU shipping tax due to the unstable situation in the Red Sea, the CEO of the Malta Maritime Forum Kevin J. Borg told The Malta Independent.

In an interview with this newsroom in November 2023, the MMF CEO had said that Malta would be at a likely risk of losing its role as a transhipment hub following the introduction of the EU Emission Trading Scheme. Borg had expressed concern that the provisions of the directive would result in major shipping carriers pulling out of Malta and seeking other options through competing ports in North Africa which would have different regulations.

The term transhipment refers to a process in which cargo is transferred from one ship to another via a terminal so that the container can continue its journey to its destination.

The Malta Independent reached out to Borg now that the scheme has been in place since the beginning of 2024 to see if its effects could be gauged up to this point.

“At the moment we can’t really assess what the effects were of the introduction of the ETS,” he said.

Borg explained that the ongoing situation in the Red Sea has resulted in ships not being able to enter the Mediterranean Sea. He said that the MMF was recently made aware that all major shipping lines will not be entering the Mediterranean as a result. He continued that this does not just mean that ships are not entering the European Union, but that they are actually not entering any Mediterranean port as they are going around Africa at its southernmost point due to the situation in the Red Sea.

He said that the freight costs have almost tripled, but that this is not entirely an element of the ETS being implemented and that it is more so a result of what is happening in the Red Sea. “The Red Sea situation is much stronger in its effects at the moment,” he added.

The Red Sea is an extremely crucial area of the world for global trade, with around 12% of global trade passing through the area. This means that around 1 trillion dollars in trade goes through the area. It is one of the most active and densely packed shipping channels in the world and is found just south of the Suez Canal, the crucial waterway which provides Europe with efficient and easy access to eastern and southern global trade routes.

Several major global shipping companies such as Maersk and the MSC Mediterranean Shipping Company had decided in December 2023 to reroute their ships from the Red Sea to go around Africa in order to avoid the conflict and keep their ships safe.

Borg was asked if the MMF’s requests for the EU Commission to consult with stakeholders and amend the directives were adhered to at all. He replied that some talks on the matter are currently planned and that they have not happened yet but will happen soon based on available information.

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