- The escalating conflict in Yemen, now in its third month, has triggered a notable redirection of tanker vessels, impacting global trade and transport.
- Geopolitical tensions and conflict in the region, coupled with concerns about maritime security, have led to changes in tanker routes and heightened costs for Egypt due to disruptions in the Suez Canal.
- Drewry AIS data reveals alterations in traffic patterns, particularly a decline in crude transit traffic through the Suez Canal since November 2023.
Route Changes and Geopolitical Impact
Vessel operators, responding to increased attacks in the region, are opting for the Cape of Good Hope (COGH) route instead of the Suez Canal. This shift has resulted in a surge in tonne-mile demand, supporting vessel earnings. While not as dramatic as the impact after the Ukraine invasion, persistent threats from Iranian-backed forces suggest potential disruptions to oil supply in the future. The Suez Canal’s strategic importance for north-bound and south-bound crude flows adds significance to these route changes.
Financial Impact and Earnings Boost
Despite the longer route via COGH, many vessel owners are choosing it, doubling voyage lengths and increasing tonne-mile demand. Earnings for Suezmax on the AG-Med (TD23) and LR1 on AG-UK/CONT routes have risen 1.5 times in the past three months. The high transportation cost via COGH for crude tankers may alter trade patterns if the situation persists. European buyers might increase crude imports from Latin America and the US, impacting tonne-mile demand for Middle Eastern crude.
Product Tankers and Trade Patterns
For product tankers, European buyers may seek alternative sources for diesel, aiming to replace Middle Eastern and Asian diesel. However, limited imports from the US due to a likely decline in US refinery runs may restrict this shift. European imports of Middle Eastern and Asian diesel are expected to remain steady, benefiting product tankers with extended voyages as owners avoid Suez Canal transit amidst the Red Sea crisis.
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Source: Drewry
