In response to increased security risks in the Red Sea, Japan’s NYK Line, one of the world’s largest ship operators, has decided to halt the passage of all its operated ships through the Red Sea. This move includes the cancellation of an immediate Very Large Crude Carrier (VLCC) cargo lifting, says an article published on sp global website.
Summary
- Japan’s NYK Line, one of the world’s largest ship operators, has decided to halt the passage of all its operated ships through the Red Sea due to increased security risks.
- This move includes the cancellation of an immediate Very Large Crude Carrier (VLCC) cargo lifting.
- NYK Line joins a growing list of major shipping companies that are suspending transit through the Red Sea.
- The decision by NYK Line to suspend Red Sea transit is a response to the deteriorating security situation off Yemen, following US-led strikes on Yemen’s Houthi rebels.
- As part of the halted passage through the Red Sea, NYK Line canceled the voyage of the VLCC Tosa to Yanbu, where it was scheduled to lift Saudi Arabian crude oil for Taiyo Oil.
- The decision by NYK Line contributes to a costlier route for moving cargoes from the Persian Gulf to Europe via the Cape of Good Hope.
- With dozens of tankers already diverted since the counter-strikes against Houthi rebels, industry experts predict that every tanker will now opt for the Cape route to Europe.
Growing Trend Of Shipping Giants Suspending Red Sea Transit
NYK Line joins a growing list of major shipping companies that are suspending transit through the Red Sea. This strategic waterway is witnessing heightened security concerns following recent air strikes, leading to longer voyage durations, a tightening supply of ships, and an anticipated surge in freight costs, according to market participants.
Security Deterioration Prompts NYK’s Decision
The decision by NYK Line to suspend Red Sea transit is a response to the deteriorating security situation off Yemen. This escalation follows US-led strikes on Yemen’s Houthi rebels on the evening of January 11. The company had been contemplating halting or changing routes for its operated ships near the Red Sea since the air strike due to increased navigation risks.
Previous Incidents Influence NYK’s Decision
The move by NYK Line is not the first instance of precautionary measures. Discussions were initiated with ship and cargo owners in November 2023 following the seizure of its chartered car carrier, the Galaxy Leader, near Hodeidah, Yemen.
Impact On Crude Lifting And Potential Alternatives
As part of the halted passage through the Red Sea, NYK Line canceled the voyage of the VLCC Tosa to Yanbu, where it was scheduled to lift Saudi Arabian crude oil for Taiyo Oil. The cancellation raises questions about alternative crude grades to replace Arab Super Light, with suggestions pointing to Malaysian grades like Kimanis.
Market Dynamics, Longer Routes And Increased Costs
The decision by NYK Line contributes to a costlier route for moving cargoes from the Persian Gulf to Europe via the Cape of Good Hope. Shipping executives highlight that longer voyages for oil tankers via the Cape are becoming a regular feature due to the current situation. The shift to this alternative route is attributed to increased bunker consumption and hefty freight premiums.
Widespread Impact On Tanker Routes
With dozens of tankers already diverted since the counter-strikes against Houthi rebels, industry experts predict that every tanker will now opt for the Cape route to Europe. This significant shift in routing is emphasized by a considerable premium, reaching $900,000 for Long Range II (LR2) tankers on the Persian Gulf-Europe routes, translating to a 20% extra cost for charterers based solely on the chosen route.
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Source: sp global
