Red Sea chaos escalated recently as Houthi rebels sank the dry-bulk freighter Tutor using a kamikaze drone boat, sending commercial shipping costs soaring. Insurance rates for vessels now reach 6% of their value, impacting global containerized freight and port operations.
Iran-supported Gulf of Aden, the vital Bab el-Mandeb chokepoint, and commercial ships in the southern Red Sea are the targets of increasing rocket and drone attacks by the Houthi rebels. The rebels have vowed to cross into the Mediterranean Sea. A major escalation occurred recently with the sinking of the dry-bulk freighter Tutor by a kamikaze drone boat. Containerized freight costs have skyrocketed due to the continued unrest, and insurance expenses have also increased.
Bloomberg talked to two people who are knowledgeable about the marine insurance industry. According to them, covering a commercial vessel for passage now costs 6% of the ship’s entire worth, up from 3% to 4% previously. Put otherwise, a vessel valued at $50 million is required to pay more than $300,000 in insurance for one sail.
“The rate is nevertheless slightly below a peak reached earlier this year when attacks ramped up,” according to Bloomberg. However, if the Houthi attacks continue into the summer, the rate will probably rise even more.
President Biden’s Operation Prosperity Guardian is failing to stop the ceaseless Houthi attacks on commercial ships in the vital shipping lane, and this week’s sinking of the bulk carrier carrying commodities by a drone boat was a true eye-opener for the shipping community and the commodities industry.
Additionally, it was the first ship that the Houthis’ multi-month assault saw sunk by a drone boat.
Dirk Siebels, a senior analyst at Risk Intelligence, characterized the drone boat attack on Tutor as “another indicator that the Houthis are stepping up their attacks on those vessels that were warned not to pass through the Red Sea,” as stated by Bloomberg.
Given that Houthis primarily target vessels with ties to the West, not all insurance prices have increased. According to Bloomberg, Chinese ships are still getting substantial discounts.
Containerized shipping is becoming more and more expensive due to the diversion of vessels from the Red Sea around the Cape of Good Hope, on top of the rising price of insurance.
The global containerized capacity is being strained by this change, which is driving up the cost of shipping 40-foot containers. At some of the busiest ports in the world, like the Port of Singapore, bottlenecks are also developing.
A research organization in London called RUSI has an associate fellow named Samuel Cranny-Evans who cautioned that drone boats “can be difficult to intercept.”
Nevertheless, rising freight and insurance charges add to the convoluted tale of inflation. Thank you, Iran, which is merely employing the Houthis as a proxy to create havoc on the sea route.
“Iran is defeating US deterrence and counterstrike in the Red Sea. “The stage is set for a similar fight in the Gulf,” said David Asher, a senior scholar at the Hudson Institute, as war risks continue to rise.
Recently, GreatGameIndia reported that in December last year, the Pentagon initiated Operation Prosperity Guardian, a collaborative effort with the UK to safeguard Red Sea shipping from Yemeni Houthi interference. Despite a budget exceeding one billion dollars, the operation failed.
