- The Red Sea crisis intensifies, leading to extended shipping diversions around the Cape of Good Hope.
- Recent attacks in the Middle East raise concerns, impacting various shipping sectors. Analysts foresee potential benefits for shipping stocks, particularly in the tanker segment.
Escalation of Red Sea Crisis
“The Red Sea crisis — and the Middle East situation in general — is worsening. There’s growing conviction that shipping diversions around the Cape of Good Hope will increase in scope and last much longer than initially expected,” reports Greg Miller. Recent attacks, including a ballistic missile hitting the Marlin Luanda and a drone attack by an Iranian-backed militia, contribute to the escalating crisis.
Impact on Shipping
“Red Sea diversions are on the rise as continued attacks on vessels in the region are prompting more shipping companies to avoid transiting the area,” says Jefferies shipping analyst Omar Nokta. Larger container ships and bulk commodity shipping already avoid the Red Sea. Crude tanker transits in the region decrease by 22%, with product tanker transits down 51%, LNG carrier transits down 87%, and LPG carrier transits down 62%, according to data from Clarksons.
Positive Outlook for Zim
“The script has flipped” for Israeli container liner operator Zim, indicating a significant shift in its business outlook. Nokta upgrades Zim’s forecast, projecting adjusted net income of $751 million this year, contrary to earlier estimates of losses. “Red Sea diversions are likely to continue for an extended period, tightening capacity for longer,” he adds.
Opportunities for Tanker Equities
According to Evercore ISI shipping analyst Jonathan Chappell, “The adage is that one should stock up on canned beans in times of war. We clearly do not make light of these tragedies, but tanker equities should also be added to the list.” Deutsche Bank analysts Amit Mehrotra and Chris Robertson believe that recent attacks will lead to more ship diversions, putting upward pressure on spot rates. They suggest companies with exposure to mid-sized crude and product tanker segments, such as Frontline, International Seaways, and Scorpio Tankers, may benefit the most from the disruptions.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: Freight Waves
