News / 'Electronic war', fake news and insurance costs weigh heavy in Red Sea

ID 304845100 © Andrii Yalanskyi

Insurance, as well as security, cost is the biggest deciding factor in Suez Canal/Red Sea routings, according to stakeholders.

Hans-Henrik Nielsen, global development director at NVOCC CargoGulf, told The Loadstar: “There are so many doomsday prophets around who like to circulate ‘news’ on social media.

“With the collision between two tankers off Khorfakkan – as soon as the heat signal was detected, people started writing ‘Iran attacking merchant vessels’ and ‘closure of Hormuz imminent’. 

“What is much more likely is jamming of signals, and I believe vessel operators and captains are having a crash course in the reality that old-fashioned navigation and dead reckoning is still a required skill for seafarers; and they should absolutely not rely upon GPS/AIS,” he added.  

He added that the ‘electronic war’ illustrated why ideas of unmanned autonomous vessels were “particularly dangerous”, adding: “Old school shipping is back in vogue.” 

And despite the rapid escalation in conflict and circulating discussions of a Strait of Hormuz closure, Mr Nielsen stressed that it was “absolutely business as usual” in the region. 

“There is no disruption in Hormuz, and we do not foresee any. I just do not have the imagination to consider a total closure – if that happens, the world would be about to have a serious revamp,” he said.  

“If (and this is the biggest ‘if’ in my dictionary) a closure of Hormuz happened, you would assume that this would be done with mines by Iran, as naval surface vessels alone would not suffice, given the strong naval presence of other countries in our waters; then commercial shipping access through a choke point for a couple of weeks will be the least of our worries.”  

However, a spike in oil prices will “no doubt” filter into the price of VLSFO. 

“Today’s spot prices in Singapore and Fujairah average around $540/550 per ton. That is a 10% jump from last week, and an 18% jump from around April. 

“Now that does have an impact on operating costs – not enough to impose a bunker surcharge, but it’s significant,” he said.  

Meanwhile, Stanley Smulders, director of product & network for Europe and Africa at ONE, told The Loadstar on the sidelines of this week’s Multimodal event in Birmingham that insurance costs were a major factor in Suez Canal and Red Sea routing decisions. 

“People think carriers are not keen to go back to the Red Sea. We actually are, because we have lost large market share in the Red Sea itself, because some of our ships that sail to Europe actually stop in the Red Sea, but that market is gone for us. 

But he said: “If the insurance companies say ‘you’re free to go, you don’t have to pay extra’, then you will see the industry change.”

Eyal Goldberg, co-founder and CEO of cargo insurance platform Breeze, explained that insuring cargo and insuring the vessel were separate issues.  

“I think a lot of the limitations from shipping lines come from a combination of both. But the shipping lines obviously care about the vessel itself, so most of the limitations are on the hull side,” he told The Loadstar.  

“From the cargo side, we are insuring per shipment, and we didn’t see a lot of substantial rate increases, but we did see a lot of layers of additional security or sanctions when it comes to destinations within this route,” Mr Goldberg added.  

He explained: “Before everything started to heat up in the Middle East, those destinations were just flowing through the system automatically, but now, for some destinations, we need to stop and not allow customers to ensure this cargo in an automated way.”