In recent days, discussions have intensified about the potential impact on the seaborne trade and ton-miles due to the evolving dynamics of market spot rates in various shipping segments, says an article published on the signal group website.
Summary
- Houthi attacks in the Red Sea are influencing seaborne trade and ton-miles. The evolving market spot rates in various shipping segments are significantly affecting trading activities.
- The crisis is impacting Red Sea vessel counts, affecting crude tanker segments and causing a spike in spot rates in the Atlantic routes.
- Suezmax and Aframax tankers, along with Supramax and Panamax Dry vessels, represent a significant portion of Suez canal crossings. These trades are the most affected.
- As the crisis deepens, there is potential for an increase in ship detours via the Cape of Good Hope. Major shipping companies are already announcing suspensions.
- Suezmax tankers and their counterparts dominate the canal’s time and serve a substantial part of total global ton-miles.
Current Dynamics And Market Spot Rates
Recent attacks by Houthi rebels in the Red Sea have sparked discussions about their potential influence on seaborne trade and ton-miles. The evolving market spot rates in various shipping segments, particularly in the container sector, are already significantly affecting trading activities.
Segment-Specific Impact
The crisis has begun impacting Red Sea vessel counts, with notable effects on crude tanker segments and a spike in spot rates in the Atlantic routes. Daily occurrences of new attacks signal an escalation, raising concerns about the broader impact on both dry and wet seaborne trade.
Choke Points And Exposure
An analysis of Suez canal crossings in 2023 reveals that Suezmax and Aframax tankers, along with Supramax and Panamax Dry vessels, represent a significant portion. Signal Ocean data indicates that crude oil Suezmax and Aframax trades, as well as agricultural commodities transported with Panamax and Supramax dry bulk vessels, are the most affected.
Potential Escalation And Rerouting Impact
Detour Via Cape Of Good Hope
As the crisis deepens, the potential for an increase in ship detours via the Cape of Good Hope, surpassing 50%, looms. Major shipping companies are already announcing suspensions, and shipping associations are emphasizing the importance of relevant hazard assessments before transiting the affected areas.
Vessel Class Exposure
Examining the exposure of each vessel class to relevant routes, Suezmax tankers and their counterparts dominate the canal’s time and serve a substantial part of total global ton-miles. The impact on various vessel classes, particularly if suspension of crossings escalates, could be significant.
Commodity Trade Exposure
Considering the impact from the perspective of affected commodities, fertilizers, gains, and clean petroleum products are highly exposed, with a substantial share of worldwide trade passing through the Suez Canal.
Freight Market Response
Upward Trend In Crude Oil Tankers
The spot market for crude oil tankers is experiencing an upward trend in the Atlantic routes, with notable increases in Suezmax rates in West Africa to UK/Continent and Aframax rates in Mediterranean trades. Vessel numbers in the Red Sea are declining, leading to record-low levels and significant rate increases.
Sensitivity Analysis
Utilizing Signal Ocean data, a sensitivity analysis reveals the potential impact on ton-miles for Suezmax tankers under various rerouting scenarios. A rerouting share of over 40% could result in a global ton-mile increase of more than 10%.
Industry Responses And Future Outlook
Response From Players
Players in the industry, particularly in the container segment, have responded by halting transit traffic. Energy sector players like Torm, Shell, BP, and Chevron are closely monitoring the situation, with potential consequences for the uninterrupted flow of oil.
Looming Risks And Economic Impact
The escalation of Houthi attacks poses a substantial threat to the global supply chain, with potential consequences for major oil trading routes. The duration of the disruption will play a crucial role in determining the extent of its impact on tonne miles.
Ongoing Developments
As the conflict in the Middle East surpasses the 100-day mark, ongoing tensions in the Red Sea raise concerns about oil price increases and potential economic impacts, especially for oil-importing countries like India. The evolving situation underscores the need for continuous monitoring of shipping routes and their broader economic implications.
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Source: the signal group
