Freight charges and insurance premia for shipping vessels plying on global routes are expected to firm up with heightened tensions between Iran and Israel.
The threat is seen high for ships bound for western European countries and the US.
Sector watchers estimate that freight rates rose by about $100 per container for ships going through the Red Sea due to disruptions and capacity constraints.
War risk insurance premium, which was at around 0.05% before the crisis, is now between 0.75% and 1% of the insured value of the vessel.
“These high premiums are a consequence of increased risk due to Houthi activity in the region,” Sunil Vaswani, executive director at Container Shipping Lines Association, said, adding that premiums might increase even further.
Global shipping major AP Moller-Maersk announced peak season surcharge for a few routes on Monday.
“There is space constraint on the ships, which is leading to higher fares. Shipping a standard size container (20 feet long) to Europe now costs $2,500, five times up from $500 before October 2023. Fares to the United States’ east coast have also risen significantly to $4,500 per container, up from $1,500 in the pre-crisis period,” Arun Kumar Garodia, chairman at Engineering Export Promotion Council of India, said. “Tensions have remained heightened, but costs will escalate if the Red Sea crisis worsens.”