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CAIRO (REUTERS) – The Suez Canal stepped up its efforts on Friday (March 26) to release a giant container ship blocking the vital commercial waterway that has skyrocketed shipping rates for petroleum product tankers and disrupted global supply chains for everything from grains to baby clothes.
Shipping rates for oil product tankers have nearly doubled after the 400-meter-long Ever Given, almost whenever the Empire State Building is tall, ran aground in the canal on Tuesday.
Efforts to free the vessel can take weeks and be complicated by unstable weather conditions, threatening costly delays for companies already navigating Covid-19 restrictions.
Shoei Kisen, its Japanese owner, denied a news report that aimed to evict him on Saturday night, saying that refloating efforts were ongoing.
The Suez Canal Authority (SCA) said towing efforts to free the ship will resume as soon as dredging operations on her bow are completed to remove 20,000 cubic meters of sand.
“In addition to the dredgers that are already on site, a specialized suction dredger is now with the vessel and will soon begin work. This dredger can move 2,000 cubic meters of material every hour,” said Bernhard Schulte Shipmanagement, technical manager at Ever Given.
The SCA said it appreciated an offer of assistance from the United States. Turkey also said it may send a ship to the canal, amid a recent push from Ankara to mend its strained ties with Egypt after years of animosity.
The suspension of traffic through the narrow channel between Europe and Asia has compounded the problems of shipping lines that already faced interruptions and delays in the supply of retail products to consumers.
Analysts expect a bigger upside impact on smaller tankers and petroleum products, such as naphtha and fuel oil exports from Europe to Asia, if the canal remains closed for weeks.
“About 20 percent of Asia’s naphtha is supplied by the Mediterranean and the Black Sea through the Suez Canal,” said Sri Paravaikkarasu, Asia oil director at FGE, adding that the diversion of ships around the Cape of Good Hope could add up to two more weeks. to the trip and more than 800 tons of fuel consumption for the Suezmax tankers.
Fuel is the single largest cost of a ship and accounts for up to 60 percent of operating expenses.
In contrast, an already weak Asian diesel or diesel market is also being aggravated by the lockdown, as Asia exports the fuel to markets in the west, such as Europe, of which more than 60 percent flowed to through the obstructed Canal in 2020. according to FGE.
More than 30 tankers have been waiting on both sides of the canal to pass since Tuesday, Refinitiv shipping data showed.
About two dozen ships could be spotted from the shores of Port Said on Friday morning, according to a Reuters witness, as the backlog accumulated along the Egyptian coast.
“Aframax and Suezmax rates in the Mediterranean have also reacted first as the market begins to price fewer vessels available in the region,” said ship broker Braemar ACM Shipbroking.
At least four Long-Range 2 tankers that could have headed toward Suez from the Atlantic basin are now likely assessing a passage around the Cape of Good Hope, Braemar ACM said. Each LR-2 tanker can carry around 75,000 tons of oil.
Increasing demand for Atlantic Basin crude within Europe will also increase the use of these smaller tankers and support freight rates, he added.
The cost of shipping clean products, such as gasoline and diesel, from the Russian Black Sea port of Tuapse to southern France increased from US $ 1.49 (S $ 2.01) per barrel on March 22 to US $ 2.58 a barrel on March 25, a 73 percent increase, according to Refinitiv.
The shipping index benchmark for LR2 vessels from the Middle East to Japan, also known as TC1, had risen to 137.5 global scale points as of early Friday, compared to 100 global scale points for the week. last, said Anoop Jayaraj, clean tanker broker at Fearnleys Singapore.
Similarly, the Freight Rate Index for Long Range Ships 1 (LR1) on the same route, known as TC5, stood at 130 global scale points on Friday, up from 125 at the end of last week. Worldscale is an industry tool used to calculate freight rates.
The impact of shipping delays in energy markets is likely to be mitigated by off-season demand for crude oil and liquefied natural gas (LNG), analysts said.
“The seasonal nature of this flow means we are unlikely to see pressure on LNG carriers moving cargo eastward as longer and cheaper Cape routes are favored,” the data intelligence firm said. Kpler.
A number of LNG tankers have been diverted, a Singapore-based ship broker said, adding that sentiment over LNG tanker fees is more positive after the incident.
He added that some European buyers who anticipate delays in Qatari LNG may be considering other options, such as buying on the spot market. Still, with demand for LNG in the off-season, the impact may be minimal, analysts said.
If the lockdown lasts two weeks, about a million tonnes of LNG could be delayed for delivery to Europe, Rystad Energy’s head of gas and energy markets Carlos Torres Díaz said in a note on Thursday.
Meanwhile, oil traders told Reuters they are taking a wait-and-see approach if a high tide forecast for Sunday would help.
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