Recent attacks on commercial ships in the Red Sea, particularly in the Bab el-Mandeb area, have intensified maritime security concerns, posing potential repercussions for the shipping industry, says an article published on sp global website.
Geopolitical Context And Increased Threats
The surge in attacks is associated with the Israel-Hamas war and the involvement of Iranian-backed Houthis in Yemen. Expressing support for Palestinians, the Houthis have targeted a range of commercial ships, from car carriers to tankers to dry bulkers, prompting heightened security advisories from navies and coast guards.
Impact On Shipping And Insurance Costs
Approximately 10% of global seaborne oil flows through the Red Sea and Bab el-Mandeb area, making it a crucial oil trade chokepoint. The escalating risks could lead to further increases in already high regional insurance costs for commercial ships.
Maritime Trade Operations in the UK issues regular alerts, emphasizing caution to shipping in response to the heightened security needs.
Premiums And Freight Rates
The conflict has influenced risk premiums for Long Range (LR) tankers, adding a substantial security charge for each voyage. Despite the recent escalation, this charge remains unchanged for LR tankers moving refined products from the Middle East and India to Africa.
Additionally, overall freight rates for tankers navigating the chokepoint have experienced a notable increase since the conflict began.
Specific Challenges For Israeli-Linked Ships
Ships with connections to Israel, including those calling at Israeli ports or with ownership links, flags, or technical management from the country, are facing higher war risk premiums.
Charterers scrutinize Israeli links during ship vetting, affecting negotiations for lower freights or even leading to ships being declined altogether.
The ongoing risks of seizures and attacks by the Houthis further compound challenges for Israeli-affiliated shipping in the region.
Opportunities Amidst Risks
While the attacks on Israel-linked ships remain a small fraction of overall traffic in the Persian Gulf and Red Sea region, some charterers are willing to consider these vessels to reduce their transportation costs.
This creates sporadic opportunities for charterers to hire Israel-linked ships at a discounted rate, although details of such deals remain private.
Potential Escalation And Response
Marine risk criteria are driving occasional cost-saving opportunities, but stakeholders emphasize that this situation may change if the conflict escalates further.
The shipping industry closely monitors developments, navigating challenges and opportunities arising from the evolving security landscape in the region.
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Source: Sp global