Oil and product tankers may be the next to divert to avoid escalating attacks against shipping in the Bab el-Mandeb strait and the Red Sea.
Vessels have not yet diverted in large numbers, but the MR tanker CL Agatha Christie has diverted away from the Suez Canal and is now drifting off the coast of Oman, according to vessel tracking data from oil analytics firm Vortexa. The tanker was sailing past Yemen over the weekend when it turned 180 degrees and retreated to Omani waters.
The tanker is controlled by BP and is carrying biodiesel, according to Vortexa. The owner is Tianjin Ruixue-V Leasing, which is connected to China's Shandong Shipping. BP has suspended tanker traffic through the Red Sea. Other firms may follow.
The Suez Canal Authority said on 17 December that 55 vessels had rerouted to go via the Cape of Good Hope since 19 November when the first vessel was hijacked by Houthi rebels. During that period, 2,128 vessels transited the canal. But this was mostly prior to the decision by several container shipping lines — including Maersk, Hapag-Lloyd, CMA CGM, and MSC — to suspend transits via the Red Sea.
The Mideast Gulf to Europe is a key route for diesel as the Mideast Gulf has supplanted Russia as Europe's primary supplier and if diesel shipments through the Suez Canal become impossible, tankers will instead sail around the Cape of Good Hope, leading to a much longer journey time and higher costs. Rerouting via the Cape of Good Hope could add around $1mn-1.5mn to freight costs, according to one industry source. In addition, the longer journey time will keep vessels off the spot market for longer, further inflating rates.
The Suez Canal was last blocked in March 2021 following the grounding of the Ever Given. The Mideast Gulf to UK Continent LR2 rate responded then by jumping to $2.49mn from $1.8mn in three days, but at a time when overall clean product movements through the canal were considerably fewer than now.
Tanker freight has been mostly unaffected so far by the recent attacks as December is generally a quieter period in which rates are depressed. But the situation depends heavily on whether there will be military intervention by the US or the EU's EUNAVFOR, which could bring the current spate of attacks to a halt.
"Given the importance of the region for global trade, there are likely to be substantial pressures for military-supported convoys, in which large groups of various ships transit together under naval protection. These convoys will take time to form and are not an ideal long-term solution as vessels face added queueing time, slower sailing speeds and limited versatility. However, they are a much better alternative time-wise than sailing around Africa," according to investment bank Jefferies.
Roughly 21pc of container movements transit the Suez Canal, 12pc of product movements, 11pc of LNG movements, 8pc of LPG, 8pc of crude — but 20pc if excluding VLCCs which cannot transit when laden — and 5pc of dry bulk — or 8pc if excluding Capesize ships — Jefferies added.
