Drone sinking of coal ship takes Red Sea economic risks to new level

The sinking of a coal-carrier by a sea drone has boosted the risk of navigating the vital Bab el-Mandeb chokepoint to a new level and is driving a fresh surge in insurance costs.The British navy said on Tuesday that the only visible objects in the last known location of the Tutor dry-bulk carrier — at which point it was semi submerged — were some debris and an oil slick. Yemen’s Houthi rebels managed to strike it with a seaborne drone, killing one crew member and injuring others.The price of covering vessels for transit — measured as a percentage of the ship’s value — surged to about 0.6% from between 0.3% and 0.4% according to two people involved in the market. It means that a vessel worth $50mn would have to pay $300,000 for one passage. The rate is nevertheless slightly below a peak reached earlier this year when attacks ramped up.The sinking is a stark reminder of a growing threat the rebels pose to vessels in the region. US and UK bombing of the Houthis, which began in January, failed to quell the attacks and instead led to vessels associated with the two nations becoming targets for the group, alongside freighters with connections to Israel.The Houthis, supporting Gazans, have warned of an expanded operation to potentially attack as far as the Mediterranean."It’s another indicator that the Houthis are stepping up their attacks on those vessels that were warned not to pass through the Red Sea,” Dirk Siebels, a senior analyst at Risk Intelligence, said of the sea-drone strike.Not all ships are paying the bumper insurance premiums. Chinese vessels continue to receive significant discount, likely because they have so far been less likely to be deliberately targeted, the people said.The Tutor incident marked the first time that a ship was successfully hit by what the military call an uncrewed surface vessel, or USV — effectively a small boat packed with explosives. It appeared the Tutor was run by a company that had deployed another carrier in Israel, thereby making the Tutor a target, security analysts said.The ship was very new, having been built in late 2022. It was capable of hauling about 80,000 tonnes of coal and would have had a value of $37.5mn if new, according to data from Clarkson Research Services Ltd, a unit of the world’s largest shipbroker.It was a far more valuable vessel than the only other ship — the 1997-built Rubymar — to have been fully sunk so far by the Houthis during their current campaign.Last week’s barrage of attacks — and the death of a crew member — also served a reminder of the impact on the seafarers who help to keep global trade running. Almost 9% of global seaborne trade went through the Bab el-Mandeb last year, according to Clarkson Research. That figure will have dropped in 2024.A separate attack last week saw a seafarer airlifted from another ship, the Verbena, with significant injuries after the vessel was also struck by what is thought to have been an aerial drone."This is an unacceptable situation, and these attacks must stop now,” 14 shipping trade groups including BIMCO said in a statement on Wednesday. "We have heard the condemnation and appreciate the words of support, but we urgently seek action to stop the unlawful attacks on these vital workers and this vital industry.”For the Tutor, the question now is what happens to the vessel as it sits at the bottom of the sea laden with coal. Often, a ship’s cargo holds will be robust enough to insulate the products it has on board for decades to come and so wrecks will just be left in place.Its insurer against risks such as oil spills was Gard AS, the largest global provider of such cover. However, as the ship was struck in a designated conflict zone its war insurance is likely to be the main source of cover.The vessel’s owner, Greece-based Evalend Shipping, hasn’t responded to requests for comment since the incident occurred. A phone call to the company on Wednesday said the relevant people were in meetings, and an e-mail went unanswered.The US Central Command says it has since blown up a few more drone boats, showing they offer a continued threat to shipping in the region.