- Improved stability in the Red Sea region could reduce freight and additional war risk premiums (AWRP).
- Singapore’s record bunker sales of 54.92 million mt in 2024 and container throughput of 41.12 million TEUs could face challenges if shorter Red Sea shipping routes resume.
- Despite the Israel-Hamas ceasefire and pledges from Iran-backed Houthi rebels, tanker movement in the Red Sea and Suez Canal remains sporadic.
The potential reopening of normal shipping across the Red Sea could significantly impact oil deliveries to Singapore, reducing freight and war risk premiums while potentially lowering bunker demand in the regional hub, reports SP Global.
Impact on Gasoline Shipments to Singapore
Market participants report that smoother operations in the Red Sea could make gasoline shipments to Singapore cheaper, benefiting from reduced premiums for Red Sea loadings.
Currently, the freight premium for the Red Sea-Singapore MR route is significantly higher than the Persian Gulf-Singapore route.
Challenges in Freight Movements
Despite the Israel-Hamas ceasefire deal and the pledge by Iran-backed Houthi rebels to halt attacks on non-Israeli ships, tanker movement through the Red Sea remains inconsistent.
Major oil tanker operators continue to avoid the Suez Canal, citing insurance approvals and unresolved safety concerns.
Singapore’s Position as a Hub
The Maritime and Port Authority of Singapore (MPA) closely monitors the Red Sea situation and its implications.
Singapore, the world’s largest bunker hub, saw record-high sales and container throughput in 2024 due to extended voyages via the Cape of Good Hope, bypassing the Red Sea.
Potential Decline in Premiums
The additional war risk premium (AWRP) for MR tankers crossing the Bab al-Mandab Strait, currently around $150,000, will decline if stability returns to the region.
Reduced premiums and freight costs could lower the delivered price of gasoline to Singapore.
Sporadic Movement and Delayed Timelines
Tanker movement through the Suez Canal remains sporadic, with operators hesitant to use the route due to high costs and the lack of clear timelines for improved security.
Outlook for Singapore’s Maritime Economy
While Singapore has benefited from the current disruptions in the Red Sea, its maritime economy could face challenges if shorter routes via the Suez Canal become viable again.
It can potentially reduce the demand for its bunkering and transshipment services.
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Source: SP Global
