Sign in
Maersk adds more suspensions to its services in the Red Sea:Danish shipping giant Maersk has reshuffled routes on its ME2 service, diverting them via the Cape of Good Hope, according to a statement. The revised rotation will see westbound calls to Salalah and Jeddah suspended until further notice. The company said that it will no longer load new cargoes at Berbera, Somalia and Hodeida and Aden, Yemen last Friday, in addition to omitting Djibouti from its Blue Nile Express service.
Hapag Lloyd is set to introduce land corridors through KSA to minimize the impact of disruptions to client businesses, as the German carrier continues to reroute shipments via the Cape of Good Hope until further notice, Reuters reports, citing a company statement. The company is looking to establish a land route linking ports in Jebel Ali, UAE and Dammam and Jubail in Saudi Arabia to an ocean shuttle service operating out of Jeddah, the newswire added.
UAE suppliers are also transporting KSA-bound goods over land to Dammam, as prices for sea freight have increased to USD 2.5k per TEU — up from USD 450-500 — amid the crisis, Gulf News reports. Sending orders through Dammam, which is 1.2k km from Jeddah, helps not only reduce costs, but ensures that deliveries to KSA are made on time, Gulf News cites an FMCG goods trader as saying. The kingdom’s customs authorities are also aiming to keep processes smooth and clear delivery trucks within two to three days, Dubai-based Gallop Shipping Haris Shaikh is quoted as saying by the newswire.
As demand jumps, Mawani is upping the port’s capacity to hedge against the risk of Red Sea tensions escalating further, Mawani President Omar Hariri told Al Eqtisadiah. While information about the extent or scope of the upgrade wasn’t disclosed, the Dammam Port currently boasts a capacity of 105 mn tons. The impact of the tensions has been limited to transit shipments, while imports and exports haven’t been affected, Hariri added.
Suez Shipyard — a company operating under Egypt’s Suez Canal Authority (SCA) — has received Greek-owned Zografia to carry out repairs, following damage incurred in a Houthi attack, SCA chairman Osama Rabie said.
Container numbers at Aqaba Port are seeing a revival, Amman Chamber of Commerce (ACC) said on X yesterday, without disclosing figures. The announcement came out of a meeting of a special crisis group — which includes ACC, the Jordanian Navigation Syndicate, and the Jordanian Logistics Syndicate — tasked with following up the effects of Red Sea disruptions on Jordan.
IN SECURITY NEWS- Italy, France, and Germany are urging fellow EU states to take part in a planned Red Sea naval force, dubbed Aspides, the Financial Times reports. The three largest EU-member states noted that the deployment should build upon an existing mission, dubbed Agenor, and not stoke tensions in the region. Agenor has “managed to build a considerable degree of trust and confidence with regional Arab States, while never entering in a confrontational mode with Iran,” the trio said in a joint paper to their European allies picked up by the FT.
ICYMI- The EU’s Political and Security Committee gave its initial backing for the move earlier last week, which is set to coordinate with the existing US-led naval coalition. Italy is trying to expedite the decision on an EU naval mission in a bid to kick off operations as soon as possible,
MARKET REAX-
#1- Shipping delays are tightening crude supply:Red Sea disruptions, surging Chinese demand, and supply outages are boosting competition for oil supplies that do not have to transit via the Suez Canal, Reuters reports, citing LSEG data and analysts. As supply tightens, the dynamics of the Brent crude futures market is seeing changes, with spot prices overtaking future contracts — in what the industry refers to as ‘backwardation’ — as markets rush to seize available oil supplies to hedge against future shortfalls. The premium for first-month Brent futures when compared to six-month futures reached USD 2.15 a barrel on Friday, its highest since early November with benchmark Brent being “the most impacted futures contract when it comes to Red Sea/Suez Canal disruptions,” lead crude analyst at Kpler Viktor Katona said.
What’s backwardation?Backwardation indicates that the forward price of the futures contract is lower than the spot price, according to CME Group. The structure occurs when there are perceptions of tighter supplies for prompt deliveries, Reuters explains, driving up sport prices in comparison to futures.
#2- Asian refiners are looking to diversify suppliers in a bid to ensure steady oil flows amid Red Sea disruptions, particularly if the situation escalates, according to S&P Global. Asian refiners are also looking to expand storage infrastructure to hedge against supply shocks. Crude shipments from Russia to China and India have so far been unaffected due to those shipments not relying on routes via the Red Sea. Despite Asian refiners not having to contend with supply shortfalls so far, they have seen their margins drop as shipment costs from major suppliers such as KSA and the UAE rise on the back of a hike in risk premiums and tanker ins. costs. The change in cost structures may prompt Asian refiners to look to alternative suppliers in the US, Africa, and South America, S&P said.
Asian bunkering demand is also poised to see an increase: Red Sea tensions are likely to support bunkering demand in Asia in 1Q as rerouting stretches journeys and increases vessel fuel needs, S&P added.
The Red Sea crisis has highlighted the value of China’s Belt and Road Initiative (BRI), revealing that it was more than just a ploy to counter Western influence, Foreign Policy reports in an analysis piece. The logistics megaproject has seen USD 1 tn in infrastructure investments in participating countries with upwards of 130 countries gathering to mark the scheme’s 10th anniversary in Beijing last October. The BRI represents “what all countries should do in their own national interest,” to hedge against supply chain disruptions, the news outlet writes.
Other countries are following suit: KSA greenlit a land corridor connecting the GCC with Israel’s Haifa Port in the Mediterranean to sidestep Red Sea disruptions. Last September’s G-20 summit in New Delhi saw the unveiling of the proposed USD 20 bn India Middle East Europe Economic Corridor (IMEC) which the US is presenting as an alternative to the BRI. Meanwhile, India is proposing the International North-South Transport Corridor (INSTC) that is slated to connect Indian markets to Russia via Iran.
Trade infrastructure is not a “zero-sum” game: Ports and other infrastructure are “nonexcludable and nonrival,” Foreign Policy writes. More infrastructure connectivity is to the benefit of all global actors that look to hedge against future shocks by boosting supply chain resilience and promoting an “antifragile” world economy, the news outlet added, applying a term coined by Nassim Nicholas Taleb.
