Shipping Costs in Red Sea Rising after Yemeni Navy Attacks

The cost of shipping goods through the Red Sea is rising as Yemen’s Houthi revolutionaries step up attacks on ships bounded to the Zionist entity, Reuters news agency reported citing industry sources.

Yemeni Navy on Tuesday hit a Norwegian commercial tanker heading for the Zionist entity with a missile in their latest protest against Israeli aggression on Gaza.

Around 23,000 ships pass through the narrow Bab Al-Mandab Strait connecting the Red Sea and the Gulf of Aden, which “eases targeting and attack options”, Reuters quoted Duncan Potts, a former vice admiral with Britain’s Royal Navy and a previous maritime security commander in the Gulf.

“These attacks have the potential to become far more of a global strategic economic threat than simply a regional geopolitical one,” added Potts, who is now a Director with Universal Defense and Security Solutions consultancy.

The London insurance market has listed the southern Red Sea among its high risk areas and ships need to notify their insurers when sailing through such areas and also pay an additional premium typically for a seven-day cover period.

War risk premiums have risen this week to between 0.1 per cent-0.15 per cent to 0.2 per cent of the value of a ship, from 0.07 per cent last week, according to market estimates on Tuesday. While various discounts would be applied, this still translates into tens of thousands of dollars of additional costs for a seven-day voyage.

“The latest incident represents a further degree of instability facing commercial operators within the Red Sea which is likely to continue to see heightened rates across the short to medium term,” said Munro Anderson, head of operations at marine war risk specialist, Vessel Protect, part of insurer Pen Underwriting.

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