As the Strait of Hormuz has effectively been blocked following U.S. and Israeli airstrikes on Iran, maritime freight rates have been surging in recent days. Domestic ship insurance premiums have also skyrocketed by as much as tenfold compared with a month earlier, raising alarm bells for South Korea’s imports and exports.

According to the Ministry of Trade, Industry and Energy on March 30, the Shanghai Containerized Freight Index (SCFI), a benchmark for maritime freight rates, stood at 1,333.11 points on Feb. 27, before the outbreak of the Middle East conflict. Since then, it began to rise sharply, reaching 1,826.77 points as of March 27, marking an increase of about 37 percent.

Analysts say that after the outbreak of the Middle East conflict, many vessels began operating on detour routes. In this process, port congestion and shipping delays led to a reduction in effective shipping capacity, a situation in which ships exist but cannot be deployed, thereby pushing up the SCFI index.

Domestic ship insurance premiums have also surged. According to data submitted by the Financial Supervisory Service to Rep. Kang Min-guk of the People Power Party, a member of the National Assembly’s National Policy Committee, insurance premium growth rates since the start of the conflict have ranged from a minimum of 200 percent to a maximum of 1,000 percent.

A total of 26 ship insurance contracts were renewed for vessels entering war-risk zones. In one case, premiums rose from around 50 million won, or about $33,104, to 580 million won following contract renewal, representing an increase of 1,056 percent.

Source:Business Korea