Red Sea transit costs rise after Houthi attacks

The cost of shipping goods through the Red Sea is rising as Yemen’s Houthis step up their attacks on ships they claim are connected to Israel. There are fears that global supplies sailing through the region could be disrupted. An important percentage of the world’s crude oil supplies have to pass through the narrow strait adjacent to Yemen.

Some 23,000 ships pass through the narrow Bab al-Mandab Strait connecting the Red Sea and the Gulf of Aden

Duncan Potts, a former vice admiral with the Royal Navy and a previous maritime security commander in the Gulf, now a director with consultancy Universal Defense and Security Solutions, told Reuters that “these attacks have the potential to become far more of a global strategic economic threat than simply a regional geopolitical one”.

War risk premiums have risen in the past seven days to between 0.1%-0.15% to 0.2% of the value of a ship, compared with 0.07% last week, according to market estimates on Tuesday December 12th. While various discounts would be applied, this still translates into tens of thousands of dollars of additional costs for a seven-day voyage.

Munro Anderson, head of operations at marine war risk specialist Vessel Protect, part of insurer Pen Underwriting, said that “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”.

Shipbroker Braemar estimated that average daily rates for supertankers, which can carry a maximum of 2m barrels of crude, had risen to more than $60,000 a day when compared with $40,000 a day last month.

“This appears to be the first attack at night, which shows a new capability (by the Houthis),” one maritime security source said.

Israel’s southern port of Ashdod, one of the country’s key terminals, said the Houthi attacks were a direct threat to Israel’s maritime trade.

U.S. President Joe Biden’s national security adviser Jake Sullivan said on December 4th that talks were ongoing about some kind of a maritime task force to ensure the safe passage of ships in the Red Sea.

Mohamed Ali al-Houthi, head of Yemen’s Houthi supreme revolutionary committee, said on social media that, in addition to avoid heading toward the Palestinian territories, ships that pass Yemen should keep their radios turned on and respond quickly to Houthi attempts at communication. He also warned cargo ships against “falsifying their identity” or raising flags different from the country belonging to cargo ship owner. Houthi military spokesperson Yehia Sarea had previously said that the Houthis had attacked the Strinda because it was delivering crude oil to an Israeli terminal and after its crew ignored all warnings.

However, the tanker’s owner, Norway’s Mowinckel Chemical Tankers, said the vessel was in fact heading to Italy (which had been its listed destination on MarineTracker), and that it had a cargo of biofuel feedstock, not crude oil.

However, the Norwegian company acknowledged that it had pencilled in a tentative Israeli port call for January. Mowinckel had not volunteered this, perhaps key, detail in the immediate hours after the attack in the Red Sea. “Upon the recommendation of our security advisors, it was decided to withhold this information until the vessel and her crew were in safe waters,” the company said.

All the data confirmed that the Strinda had not loaded crude oil, but instead was carrying vegetable oil and biofuels loaded in Malaysia, and that it was headed for Venice. Italian energy firm Eni confirmed the ship was carrying 15 thousand tons of residues and waste from vegetable oil processing, and that this was destined for Eni’s biorefineries in Italy.

Neither Houthi officials nor the Israeli government made any immediate comment on this new set of facts.

Following the attack, Israel’s military said it had deployed one of its most advanced warships, a Sa’ar 6 class corvette, in the Red Sea.