Red Sea shipping costs rise after Houthis target more commercial vessels
logistics | mavigation commercial | premium insurance | Maritime safety | SupplyChain
Par Ibrahima DIALLO
13 December 2023 / 15:10

The cost of shipping goods across the Red Sea is rising as Yemen's Houthis step up attacks on ships they deem linked to Israel for fear of a spillover that could disrupt global supplies sailing through the region, industry sources said.

Yemen's Houthis claimed on Tuesday to have hit a Norwegian commercial oil tanker with a missile in their latest protest against Israel's invasion of Gaza, underlining the risks of a conflict that has shaken the Middle East.

Some 23,000 ships pass through the narrow Bab al-Mandab strait linking the Red Sea and the Gulf of Aden, which "facilitates targeting and attack options", said Duncan Potts, former vice-admiral of the British Royal Navy and former commander of maritime security in the Gulf.

"These attacks have the potential to become a global strategic economic threat far more than just a regional geopolitical threat," added Potts, who is now a principal at consulting firm Universal Defense and Security Solutions.

The London insurance market has classified the southern Red Sea as one of its high-risk areas, and ships must inform their insurers when crossing these zones and pay an additional premium, usually for a seven-day period of cover.

War risk premiums rose this week to between 0.1% and 0.15% to 0.2% of a ship's value, up from 0.07% last week, according to market estimates on Tuesday. Although various discounts are applied, this still translates into tens of thousands of dollars in additional costs for a seven-day voyage.

"The latest incident represents a further degree of instability facing commercial operators in the Red Sea, which is likely to continue to see high rates in the short to medium term," said Munro Anderson, head of operations at Vessel Protect, a specialist in maritime war risks, part of insurer Pen Underwriting.

Average daily rates for supertankers, which can carry a maximum of 2 million barrels of crude, have risen to over $60,000 a day, up from around $40,000 a day last month, according to estimates by shipbroker Braemar.

Some shipping companies have already opted to reroute their ships via the Cape of Good Hope away from the Red Sea, increasing journey times and additional costs.

"This appears to be the first night attack, which shows a new capability (of the Houthis)," said a maritime security source. Israel's southern port of Ashdod, one of the country's main terminals, said the Houthi attacks posed a direct threat to Israel's maritime trade.

U.S. President Joe Biden's National Security Advisor, Jake Sullivan, said on December 4 that discussions were underway on a "kind of" maritime task force to ensure the safe passage of ships in the Red Sea.

Commercial shipping should never be "a collateral victim of geopolitical conflicts", said Kitack Lim, Secretary General of the UN maritime agency, on Tuesday, adding that he urged member countries to work together to ensure "unhindered and safe global shipping".

Jonathan Saul Marine Link




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