The article highlights the challenges posed by the Red Sea crisis and the potential long-term impact on shipping rates. The author suggests that the crisis could lead to sustained higher freight rates, particularly for those segments most affected by the rerouting of vessels, according to Breakwave Advisors.
Bulker Transit
For the 10 (load) months of 2024, laden bulker transits (by count) have dropped by more than 2,500, with geared bulkers (<68,000 Dwt) bearing the brunt. Ultramax’s (60-68,000 Dwt) laden transits dropped more than 500, while those of Supramaxes (50-60,000 Dwt), Handysizes (25-40,000 Dwt) and Minibulkers (3-25,000 Dwt) have declined by more than 300, 450, 200, respectively, over the same period. This represents a loss amounting to just over 1,500 laden transits of geared vessels via the Suez Canal. On the other hand, the decline of the mid-sized Panamax segment (68-100,000 Dwt) is close to 600, while those of the large-sized fleet (>100,000 Dwt) is under 400.
In essence, Red Sea diversions had a disproportionate impact on geared tonnage. The above statistics suggest (to a certain extent) why S10TC and HS7TC rates in the second half of 2024 (in particular in November) remained resilient while the rest of their peers lose momentum against a lackluster demand-side backdrop.
Lack Of Demand
As a side note, breaking down the present numbers for Capesize’s laden transits, the decline is mainly attributed to a fundamental lack of demand for Russian coal by China and India, not because of rerouting decisions. Russia’s coal industry faced a crisis following the 2022 invasion of Ukraine, as the European Union banned Russian coal imports.
This forced exporters to shift focus to Asia, which initially procured Russian supplies at significant discounts. However, these discounts had diminished by mid-2023, compounded by logistical challenges (rising costs of railway, freight and port services) which further limited its appeal to Chinese and Indian buyers. On the other hand, if it were not for the re-emergence of Ukrainian iron ore shipments in 2024 which were exclusively shipped via Suez, the annual decline would be even uglier.
However, when we turn our attention to the ballast bulker transits via Suez Canal, the impact of the Houthis’ attacks appears more moderate. For the 10 (discharge) months, the y-o-y decline in ballast transits amounts to less than 300. There is still a substantial number of shipowners that are risk-adverse towards heading via Suez when carrying cargoes but decide to brave the dangers when repositioning back to loading areas. In fact, Panamax (68-79,000 Dwt) ballast transits have risen slightly y-o-y, led by improved ballasters count ex-India/China to Ukraine (for grain loadings).
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Source: Breakwave Advisors
