BLACK SEA marine insurance costs have become astronomical representing a near insurmountable barrier to Russian exports.
It costs about US$3.5 million to hire a tanker to take a million-barrel cargo to Italy from the Russian black Sea port of Novorossiysk compared to $700,000 earlier this year, according to industry data compiled by Bloomberg.
Insurance charges are as much at 10 per cent of the value of a ship's hull, that is the value of ship itself to cover additional war risk, according to four people involved in the market.
Some are simply quoting to cover at prices that they know will be refused. There was almost zero cost prior to the war.
As such a US$50 million, five-year old tanker hauling a standard one million-barrel Russian cargo would need $5 million just in insurance premiums about - $1.5 million above the cost of hiring the ship itself.
The primary concern from insurers is damage to vessels, either through missile attack or possible mines. When war broke out, five ships were blown up. A month later, a mine was discovered around Turkey's Bosporus strait, a vital maritime corridor for any carrier entering or leaving the Black Sea.
One source told Bloomberg that the pool of insurers still quoting has substantially dried up, meaning those who remain are demanding higher prices.
The charges would typically be met by companies hiring the ships, not vessel owners. The Black Sea is normally a hub for exports of crops, oil, fuels and raw materials but has been disrupted by Russia's invasion of Ukraine. One of the insurers said that current prices are essentially unsustainable for customers.
The surge in insurance premiums represents just another expense for any company seeking to ship anything to or from ports in region. The cost of vessel hire is extreme too.
SeaNews Turkey
It costs about US$3.5 million to hire a tanker to take a million-barrel cargo to Italy from the Russian black Sea port of Novorossiysk compared to $700,000 earlier this year, according to industry data compiled by Bloomberg.
Insurance charges are as much at 10 per cent of the value of a ship's hull, that is the value of ship itself to cover additional war risk, according to four people involved in the market.
Some are simply quoting to cover at prices that they know will be refused. There was almost zero cost prior to the war.
As such a US$50 million, five-year old tanker hauling a standard one million-barrel Russian cargo would need $5 million just in insurance premiums about - $1.5 million above the cost of hiring the ship itself.
The primary concern from insurers is damage to vessels, either through missile attack or possible mines. When war broke out, five ships were blown up. A month later, a mine was discovered around Turkey's Bosporus strait, a vital maritime corridor for any carrier entering or leaving the Black Sea.
One source told Bloomberg that the pool of insurers still quoting has substantially dried up, meaning those who remain are demanding higher prices.
The charges would typically be met by companies hiring the ships, not vessel owners. The Black Sea is normally a hub for exports of crops, oil, fuels and raw materials but has been disrupted by Russia's invasion of Ukraine. One of the insurers said that current prices are essentially unsustainable for customers.
The surge in insurance premiums represents just another expense for any company seeking to ship anything to or from ports in region. The cost of vessel hire is extreme too.
SeaNews Turkey
