Shipping Costs Soar as War and Climate Risks Upend Trade - Yahoo Finance
Shipping Costs Soar as War and Climate Risks Upend Trade
(Bloomberg) -- 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.
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Chartering costs for a so-called Suezmax, the largest class of oil tanker 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.
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, as well as smaller ships, is being upended as more tankers get stuck on longer voyages, crimping their availability, while it’s business-as-usual for supertankers that don’t use any canals or 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 earlier in the week. These points represent a percentage of a fixed, pre-determined rate for a given route, and tend to fluctuate according to supply and demand dynamics.
Rates for LR-ships from the Middle East to Northwest Europe also jumped to the highest since January, according to Baltic Exchange data.
Read More: Ship Insurance for Red Sea Transit Soars as Attacks Persist
A steep decline in the number of tankers entering a vital Red Sea conduit suggests that attacks on ships in the area are already disrupting trade flows.
So far this week, only about 30 tankers, including crude oil and fuel carriers, have entered the Bab al-Mandab Strait, which lies at the sea’s southern end, according to vessel-tracking data compiled by Bloomberg. That’s equivalent to a drop of more than 40% versus the daily average over the previous three weeks.
(Updates with vessel traffic information in final two paragraphs)
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Related Knowledge Center: Climate economics
Climate change is now a driver of the world’s economy. The impact is profound:
- Catastrophic weather events — hurricanes, floods, droughts, high temperatures — are more frequent and more extreme. The cost can be measured in both the initial damage caused and the longer-term impact on the economy.
- Vulnerable communities are increasing climate-related investments, hardening infrastructure and taking other protective measures.
- Investment in carbon capture and storage technologies is increasingly rapidly.
- Governments are making investments and crafting regulations to reduce emissions of carbon dioxide and other greenhouse gases.
On top of all of this is the cost of uncertainty. As the Fourth National Climate Assessment, released in 2018 by the U.S. Global Change Research Program, says, “The assumption that current and future climate conditions will resemble the recent past is no longer valid.”