Shipping costs soar as war and climate risks choke key waterways
Rates for certain classes of tankers spike due to diversions
Global shippers of crude and fuels are grappling with a spike in booking costs for some tankers taking lengthy diversions to avoid disruptions at the Suez and Panama canals.
Chartering costs for a so-called Suezmax, the largest class of oil tankers that can pass through the Suez Canal with its tanks full, soared as more ships opted to sail around Africa to avoid attacks in the Red Sea. They can carry 1 million barrels of oil when fully laden, and are often used to transport crude from Russia or the Mediterranean Sea to Asia, or from the Middle East to Europe.
Rates for another class of ships known as long-range tankers also jumped. They can move about 600,000 barrels of oil, and are used to carry crude and fuels such as diesel and naphtha through the Suez and Panama canals. LR-tankers, sometimes referred to as Panamaxes, have also been impacted by diversions from the Panama Canal, where record-low water levels have contributed to a snarl.
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In recent weeks, attacks by Iran-backed Houthi rebels in the Red Sea have caused panic across the shipping industry, with everything from oil to container vessels targeted as the Israel-Hamas war spreads across the region. The market for vessels purpose-built for the Suez Canal and smaller ships is being upended as more tankers get stuck on longer voyages, crimping their availability, while its business-as-usual for supertankers that don't use any canals nor shortcuts due to their large size.
This week, provisional chartering rates for a Suezmax tanker to move oil from Iraq to the Mediterranean rose above 90 worldscale points, said shipbrokers. That's a sharp jump from between 75 to 85 points in provisional bookings made in the past week. These points represent a percentage of a fixed, pre-determined rate for a given route, and tend to fluctuate according to demand versus supply dynamics.
Rates for LR-ships from the Middle East to Northwest Europe — or TC8 route — also jumped to the highest since January, according to Baltic Exchange data.
From January to November, a total of around 8.2 million barrels a day of crude and oil products were moved via the Red Sea, according to Vortexa in a Dec. 18 note. Around 30 tankers enter or leave the Red Sea on a daily basis via the southern end of Bab el Mandeb, while 26 transit using the northern side of the Suez Canal, it said.
