Suez lockdown propels shipping inventory amid rising freight costs

Actions by shipping operators have jumped at the prospect of higher freight rates, as a likely prolonged blockade of the Suez Canal has forced industry executives to consider long alternative routes for their ships.

Chinese firm Cosco Shipping and South Korean firm Hyundai Merchant Marine led the Asian stock price surge on Friday with increases of nearly 10% after rescue experts said it could take weeks to dislodge the container ship Ever Given 400 meters from the banks of the Suez Canal.

Shipping companies were considering re-routing the goods around Africa, which would add at least seven days and significant costs to the trips. James Wroe, line operations manager at Maersk Asia Pacific, wrote on social media that the decision was a “roll of the dice”.

Hyundai Merchant Marine has already hijacked the Hyundai Prestige, which sails from Southampton to Laem Chabang in Thailand, to bypass the Suez Canal and travel the Cape of Good Hope in South Africa. Brokers in Singapore and Tokyo said similar rerouting decisions were “imminent” for a number of tankers and other vessels.

Shipping companies have estimated that around 200 ships were blocked on either side of the Suez, the choke point through which about 12 percent of world trade circulates. The route is essential for oil, gas, and high demand food items such as coffee.

The Suez Canal in figures


The average number of ships crossing the Suez Canal, 120 miles long each month – over 50 ships per day


Bulk carriers represent nearly 30% of traffic, container ships 25% and tankers 15% of transits


The number of ships that crossed the Suez Canal in 2020 (data provided by Refinitiv)

Dutch and Japanese rescue specialists have produced a variety of theories on how best to free Ever Given, a formidable technical challenge that was complicated by the inclement weather. Nippon Salvage, who is part of the rescue effort, declined to comment.

An official at Shoei Kisen Kaisha, the Japanese owner of the Ever Given, said he was focusing on the removal of the container ship, but added that resolving the situation remained “extremely difficult”.

“The market is betting the problem could last for a while,” said Kim Youngho, analyst at Samsung Securities. “If you take a detour via the Cape of Good Hope, it will probably take you at least a week longer to reach the Netherlands from Shanghai. . . if you have to take a detour it should increase the current freight rates more. “

Ocean Network Express, a joint venture between Japan’s three largest shipping companies, said if nothing had been decided on the rerouting, the situation was being closely watched.

Westbound ships leaving – or scheduled to leave – ports in Japan, Korea, China and elsewhere in Northeast Asia would normally do so, the ONE added. However, the situation would be assessed when they reached Singapore.

Analysts said there was a specific point in the Indian Ocean where shipping companies should decide whether to take the Cape of Good Hope route or head to Suez, betting the blockage would be cleared by the time. of their arrival.

Mitsui OSK Lines, which has four tankers carrying chemical and steel materials stranded at Suez, said it does not plan to re-route the ships in the hopes the situation could be resolved within two weeks.

Ong Ye Kung, Singapore’s transport minister, wrote on Facebook that “supplies to the region may be temporarily cut off.”

About a third of the world’s maritime trade passes through the city-state and the Strait of Malacca, a key shipping route between the Indian and Pacific Oceans. A prolonged blockade of the Suez would mean the Port of Singapore “could see schedule disruptions when shipping lines reroute their journeys,” Ong said.

Reporting by Leo Lewis and Kana Inagaki in Tokyo, Song Jung-a in Seoul, Hudson Lockett in Hong Kong and Stefania Palma in Singapore

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