Ships begin costly and lengthy detours around Africa with the Suez Canal still blocked by a huge container ship, as a complex rescue mission could take weeks.
The prospect of a longer-than-expected disruption along what is arguably the world’s most important maritime trade route threatens further turbulence in a shipping industry that is already struggling to keep shipping for everything, from finished products to energy and commodities.
Work since Tuesday to get the distressed Ever Given afloat has so far been unsuccessful, with tugs and diggers failing to move the giant 400-meter-long vessel and clear the route for ocean carriers. stranded carrying billions of dollars in oil and consumer goods. .
If the containers can be left aboard the Ever Given, the re-float is expected to be completed on Thursday, helped by higher tides, according to Randy Giveans, senior vice president of Equity Research for Energy Maritime at Jefferies LLC. If the cargo needs to be unloaded or if major repairs need to be made on the canal itself, “the downtime could certainly be at least two weeks,” he said.
Two liquefied natural gas tankers loaded in the United States and bound for Asian markets appear to have changed course in the mid-Atlantic and are now heading around Africa to avoid traffic jams on the Suez Waterway. AP Moller-Maersk A / S and Hapag-Lloyd AG are planning to send ships along the same route, movements that would follow a ship run by Synergy Marine that is sent around the Cape of Good Hope. Torm A / S, a Danish tanker owner, said his customers had asked about the cost of the diversion options.
According to Giveans, ships currently outside the Red Sea that were planning to use the Suez Canal are deciding to re-route around Africa, adding 10 to 15 days to their voyages. Ships lining up at either end of the Suez Canal area will likely wait to determine how long the crossing will be closed before making the decision to divert, he said.
“As for the possible alternatives, we are looking at all of them, including the Cape of Good Hope but also many others, for example air solutions for critical and urgent cargoes,” Maersk said in a statement. “No concrete decision has yet been taken. This will depend on how long the Suez Canal remains impassable. “
Of particular concern for the broader economic impact of the Suez incident is the lifelines for European companies ranging from automakers to retailers who depend on a constant flow of Asian imports. The blackout comes on top of the effects of the pandemic which has already wreaked havoc on supply chains with shortages and delays.
South Korean company HMM Co. said a giant ship has been waiting outside the Suez Canal to return to Asia since Wednesday. A list of the cargo on board gives an indication of the potential for disruption in a range of sectors, and includes lumber, machinery, frozen beef, paper, milk powder, furniture, beer, frozen pork, automotive components, chocolate and cosmetics.
Caterpillar Inc., America’s largest machinery producer, has said it faces shipping delays and is even considering air freight products if needed. The US National Security Council is closely monitoring the situation, a spokesperson said Thursday evening.
Germany’s Hapag-Lloyd container line said it was closely monitoring “the implications for its services. We are currently studying possible hijackings of ships around the Cape of Good Hope. “
For container lines that carry around 80% of global merchandise trade, a prolonged bottleneck between Europe and Asia may disrupt delivery schedules set months in advance so importers can plan. their purchases, manage inventory and keep store shelves stocked or production lines running.
The problem is getting worse with each day that container ships have to wait. Ships arriving several days late cannot be emptied and reloaded in time to make the scheduled return voyage. This leads carriers to cancel their trips – further limiting capacity and driving up freight rates.
A rerouting around the Cape of Good Hope in South Africa would add 6,000 miles to the trip and something like $ 300,000 in fuel costs for a super-tanker delivering oil from the Middle East to Europe.
Owners of supertankers carrying 2 million barrel cargoes had been losing money for weeks on the industry’s benchmark trade route – a function of OPEC + withholding millions of barrels of supply on the market. global market. On Wednesday, however, the carriers returned to profitability. Fares for small vessels carrying crude are also increasing, and revenues from petroleum product vessels sailing from the Middle East to Europe have also jumped.
“The longer it lasts, the more likely you are to have that impact,” said Brian Gallagher, head of investor relations at Euronav NV, owner of the third largest fleet of supertankers in the world. “Rather, it is a reminder of the fragility of some of the infrastructure that exists. This can have a ripple effect with people thinking they will take the longer transit for greater certainty. “
Shipping brokers report that oil traders are increasingly hiring tankers with “just in case” options to navigate around Africa if the blockage persists. Ships sailing empty to collect oil in northwestern Europe could be delayed, forcing exporters in the region to seek alternative carriers, according to those involved in the market.
Charter prices for tankers in some areas have increased since the lockdown appeared. Suezmax ships, which typically carry 1 million barrels through the canal, are now fetching around $ 17,000 a day, the maximum since June 2020. If more ships are forced to sail around the southern tip of Africa, that will increase rates as travel times increase.
The canal currently holds around 2 million barrels per day of oil flow, according to Braemar’s estimates. Congestion is also hitting bulk carriers shipping products from wheat to iron ore. There is a long queue of bulk carriers at the moment – just under 40 vessels – according to Peter Sand, chief shipping analyst at the BIMCO trade group.