The ongoing conflict between Iran and Israel is causing a ripple effect throughout the shipping industry. Insurance costs and freight charges for ships traveling global routes are expected to increase significantly, especially for vessels headed to Western Europe and the United States.
Industry experts estimate that the disruptions and limited capacity caused by the tensions have already bumped up freight rates for ships passing through the Red Sea by roughly $100 per container.
The cost of war risk insurance has also skyrocketed. Premiums, previously around 0.05% of a ship’s insured value, are now between 0.75% and 1%. Container Shipping Lines Association Executive Director, Sunil Vaswani, warns that premiums could climb even higher, citing the increased risks stemming from Houthi activity in the region.
In response to the situation, global shipping giant AP Moller-Maersk recently announced peak season surcharges for several routes.
“Shipping space is limited, resulting in higher freight charges. Transporting a standard 20-foot container to Europe now costs $2,500, a five-fold increase from the $500 cost prior to October 2023. Rates to the US East Coast have also jumped, rising from a pre-crisis cost of $1,500 per container to $4,500,” explained Arun Kumar Garodia, Chairman of the Engineering Export Promotion Council of India. “While tensions are already causing problems, costs will escalate further if the Red Sea crisis worsens.”
– Shipping costs
– Red Sea shipping
– Container freight rates
– Global shipping cost
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