Tanker Rates Rise As Global Shippers Scramble To Reroute Ships Around Africa
Update (1315ET): Bloomberg has published more details on the push for global shippers to divert ships around Africa. Torm, a Danish owner of tankers, said its customers have asked about the cost of options to divert. BBG said the diversions are being considered as markets on everything from oil to feedstock to refined petrochemicals are being impacted by what's now being widely referred to as the "Suez crisis."
Torm A/S, a Danish owner of tankers, said its customers have asked about the cost of options to divert. Rates for so-called LR2 vessels are up 10%, and ships could divert around South Africa, according to Jacob Meldgaard, chief executive officer of Torm A/S, which owns product tankers.
Already, shipbrokers are reporting that oil traders have started hiring tankers with "just-in-case" options to sail around the Africa should the blockage drag on. Vessels sailing empty to collect oil in northwest Europe could get delayed, forcing the region’s exporters to seek alternative carriers, market participants told BBG. Another consequence is that prices of naphtha, a must-have feedstock that Asian petrochemical plants buy in large volumes from Europe, have soared, per data from the Baltic Exchange in London.
Due to rising demand, prices for VLCCs carrying crude from the Middle East to China rose to $1,371 a day, registering a profit for only the second day in over 7 weeks, according to Baltic Exchange data. It's the highest since Jan. 27. The canal blockage "is having more of an impact on the Suezmax sector where rates are starting to rise and where a lengthy blockage will more quickly affect vessel supply balances," Claire Grierson, senior director of tanker research at SSY, told Bloomberg.
The congestion is hitting bulk carriers that ship products from wheat to iron ore. Just shy of 40 of these bulk ships are stuck in the Suez traffic jam, according to Peter Sand, chief shipping analyst at trade group BIMCO.
"Unless the situation is resolved very quickly we will soon see ships sailing south of Africa," Sand said. "Oil tanker rates are terribly low at the moment so that’s where there’s most upside. Then some upside for dry bulk."
"In the past 24 hours, we have received several requests for price options to divert vessels," he said. "New arbitrage trade flows could emerge, but this all depends on how long the Suez Canal will be blocked."
The Suez is responsible for 2MM barrels a day of oil flows, according to Braemar estimates shared with Bloomberg.
Bottom line: as we mentioned earlier, higher shipping costs will inevitably stoke higher inflation, which could create problems for Fed Chairman Jerome Powell and his expectation that rising inflationary pressures will be "transient."
https://www.zerohedge.com/economics/global-shippers-scramble-reroute-ships-around-africa-suez-crisis-worsens