Infographic: Conflict in the Red Sea disrupts commodities shipping

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Ongoing attacks on shipping by Houthi militants in the Red Sea have upended seaborne trade through the strategic waterway. Container shipping is taking the biggest hit, with many rerouting via the Cape of Good Hope significantly boosting voyage times and freight cost, while displacing regional marine fuel demand.

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'LNG dark fleet' could emerge to transfer Russian gas amid sanctions: Flex LNG

Russia could be building an "LNG dark fleet" to transport natural gas cargoes in the face of Western sanctions, taking a page from its own playbook in shipping crude and petroleum products, shipowner Flex LNG said May 23. While existing sanctions on shipping Russian LNG have been limited and focused mostly on restrictions on buyers, the US and UK have sanctioned Novatek's Arctic LNG 2 project with a total planned production capacity of 19.8 million mt/year. The EU is now mulling similar measures that could widen curbs to include re-exports of existing Russian LNG supply from its ports. The project developers of Arctic LNG 2 were originally planning to build around 21 Arc7 icebreaking LNG carriers specialized to operate in icy conditions, but the 172,600-cu m vessels' construction has been hampered by sanctions and their fates were uncertain . Arctic LNG 2, initially scheduled to be commissioned in phases between 2023 and 2026, has not been able to start LNG production due to the shortage of ice-breaking ships and could turn to existing tonnage to meet export requirements, Flex suggested in its quarterly report. Currently, around 15 icebreaking LNG ships are serving Novatek's Yamal LNG project. A potential scenario is that those vessels would also be carrying cargoes from Arctic LNG 2 to non-icy waters for transshipment to conventional ships, which then sail to overseas buyers. This would lead to additional demand for LNG carriers, especially if the EU's proposed sanctions on Russian LNG also get approved. As secondhand activity for old ships involving opaque firms has reportedly picked up, Flex CEO Oystein Kalleklev said in a conference call: "This could potentially be the start of our LNG dark fleet ... They will have to do more ship-to-ship transfers." TradeWinds reported little-known companies based in Vietnam, China and the UAE were buying old tonnage recently, with some deals fetched at high prices. "[They] may be soaking up some of the steam [turbine] tonnage that would otherwise be scrapped," Kalleklev said. Sanctioned trades The secondhand sales have been reported even as Russia accumulated a large number of oil tankers via shell companies or in coordination with opaque firms -- many of them based in other countries -- since its invasion of Ukraine in February 2022 to bypass the Western oil embargo and the G7 price cap, according to market participants and government officials, often calling them the "shadow," "gray" or "dark "fleet. A joint study by S&P Global Commodity Insights and S&P Global Market Intelligence found that 591 tankers as of April were either confirmed by Western authorities to have violated sanctions or at high risk of breaching them, accounting for just over 10% of the global trading fleet. "Russia is planning to do something similar to what we have seen on the oil and petroleum side," Kalleklev said. The Oslo- and New York-listed company's warning comes as the EU is discussing its 14th package of sanctions against Moscow, which might include measures intended to restrict re-exports of Russian LNG that landed at EU ports to other markets. It is not clear whether such a measure would target ship-to-ship transfers, which could take place in international waters. The EU saw its Russian gas and LNG purchases fall from 155 Bcm in 2021 to 80 Bcm in 2022 and to just 43 Bcm last year, according to European Commission data. But there won't be any EU-wide ban on Russian imports for now, as member states are to be allowed to decide on how to limit import levels individually. Even if the EU was to reduce purchases of Russian LNG significantly, the cargoes would flow to "willing buyers" in Brazil, India, China and South Africa, resulting in longer sailing distances, Kalleklev said. Ton-mile demand could increase in this scenario. Platts, part of Commodity Insights, assessed the charter rate for a Tri-Fuel Diesel Electric LNG carrier in the Atlantic at $36,500/d and two-stroke carrier rates at $47,500/d on May 23.


Niger's maiden crude cargo set to load from Benin's Seme

Niger's maiden crude cargo is set to load at Benin's Seme port, according to sources and shipping data, turning the landlocked African country into an oil exporter less than a year after a military coup. Data from S&P Global Commodities at Sea showed the Front Cascade, a 1 million barrel capacity Suezmax, sitting just outside the Seme terminal in preparation to dock, as of 1330 GMT. Its destination was listed as a single point mooring registered to the West African Oil Pipeline (Niger & Benin) Company (WAPCO), a subsidiary of China National Petroleum Corp, which constructed the Niger-Benin pipeline. "Front Cascade tanker [is] now loading at Seme for the first cargo," a source told S&P Global Commodity Insights on May 17. The imminent loading marks the startup of the 110,000 b/d crude pipeline, which will pave the way for a massive increase in Niger's oil production and make it a significant exporter. Currently the arid, landlocked country produces just 20,000 b/d of crude from its Agadem Rift Basin, which is primarily used domestically due to the lack of an export route, but it is ready for an immediate ramp-up of output to fill the new pipeline. The pipeline is expected to start up at 90,000 b/d before ramping up to full capacity, sources said. "This is a major milestone in Niger's economic history -- akin to the development of uranium mining in the 1970s," said Jim Burkhard, S&P Global's vice president of oil markets, energy and mobility. "It is a notable oil market development as well -- Niger is set to become the world's newest oil exporter. And it is adding to world oil supply growth taking place outside of OPEC+." Sanctions risk The project's progress looked in doubt in 2023 after Niger's President Mohamed Bazoum was overthrown by his presidential guard, leading to punishing sanctions on the country by regional bloc ECOWAS. The measures effectively shut the Benin-Niger border, meaning a number of pumping stations were waiting for equipment stuck in Benin. However, the relaxation of sanctions in March allowed CNPC to complete construction of the 2,000 km pipeline and begin to move crude through it to storage tanks at Seme, sources said at the time. In recent days, the two governments have continued to quarrel publicly over the months-long border closure, but on May 16 Benin's government granted provisional authorization for the first ship to load Nigerien oil at the Seme platform. "They will agree on something," a source familiar with the discussions said May 13. "They both need the money." Oil is expected to become a major revenue source for Niger -- which also boasts significant uranium deposits -- while Benin will benefit from transit fees through the pipeline.


New peak season paradigm develops in Asian container markets

The peak season schedule for westbound Asia-Europe container markets, which typically begins in June, has already begun as Red Sea diversions, port congestion and container shortages pressure shippers to secure their shipments amid delays in Asia, according to an S&P Global Commodity Insights analysis. The increased demand has driven the FAK container spot market for Westbound North Asia – North Europe cargo to its highest since mid-March, with the Platts Container Rate 1 - PCR 1 rate assessed at $4,950/FEU on May 14, up a sharp $2,150/FEU from March 15, Commodity Insights data shows. Extended transit times around Southern Africa for Far East Asia-to-Northern Europe shipments have caused service schedules challenges for carriers. Regularly carriers observe weekly services on major trade lanes, now however, blank sailings are rife due to time taken to transit around the Cape instead of the Suez Canal. As shippers prepare for end of year holidays, not only have orders started sooner, as early as April, but larger bookings are being made. "A lot of customers are looking at their supply chain forecasts and booking 40/TEU a week instead of 20/TEU," a carrier source continued, "our clients have cleared their warehouses of old stock to get new stock in for the conventional busy periods." Increased spot market Sources also said that major liners are taking advantage of the current conditions since some shippers delayed securing long term contract rates and are now reeling on the spot rate market. Shippers have tended to lock in contracts for the season in March or April, when prices tend to bottom out but this year the price increases started earlier than usual and as shippers waited for prices to drop, they instead kept rising. Having missed the opportunity to lock in contracts, "the space allotted to them (shippers) on named account deals has been taken back and opened up to the spot market," a carrier source said. Another issue for forwarders is a continued lack of space on vessels along with a dearth of container availability in Chinese ports that is also supporting higher prices. "We are afraid rates will go even higher, rates are already high but carriers are maximizing revenue as they try to reduce their long term contracts, prioritizing the FAK spot market," a forwarder source said. "Ningbo and Shanghai are congested, there is currently vessel berthing delays of 3-6 days due to ship bunching and fog, another twelve of our boxes have been rolled for next week as Yantian has a lack of 20"/40" containers," a forwarder source said, "those on long term contracts are in a happy place and those left on spot rates are struggling." Logistics sources are expecting spot rates to remain bullish in the short term as major carriers begin releasing further general rate increases (GRIs), their fourth announcement in three months. The effect of the Red Sea diversions are set to impede services for the foreseeable future despite carriers best efforts to contain the market with additional vessels, leasing further container equipment and alteration of service loops, sources said.


Bunker fuel loaded per ship in Panama rises during transit restriction period, government data shows

The number of ships calling for bunkers in the Panama Canal in the five months since traffic restrictions were imposed has fallen 23.84% year on year, but the loaded volume per vessel has increased, data from the Panama Maritime Authority shows, as a recovery in shipping traffic and bunker sales through the global waterway is expected by June. Bunker market suppliers have said sales volumes for April, which have not yet been released by the Maritime Authority, and for May seem to have increased. "I would say that April was better than March," a trading source said. "More tons were delivered." Ships loading marine fuels in Panama in March 2024 totaled 479, the lowest number since 564 vessels bunkered in the hub in January 2021, and 34.1% percent under a post-IMO 2020 peak of 727 ships in December 2022, according to the data. Transit through the Panama Canal has been restricted since November after a severe drought brought by El Nino led the Panama Canal Authority to cut daily crossings in an effort to preserve water levels in the reservoirs feeding the canal. Ships bunkering in the November 2023-March 2024 period totaled 2,514, a decline of 787 vessels, or 23.84%, compared with November 2022-March 2023. Sales of bunker fuels in Panama in the same period fell by 308,383 mt, or 13.99%, to 1,895,680 mt. More volume per load The smaller decline in sales compared with the number of ships transiting the Panama Canal might be explained in part by a higher volume of fuel loaded per ship in the five-month period. In March, the average volume of bunker loaded per vessel reached its highest level since January 2020, 815.61/mt, an increase of 4.28 percent compared with a previous high of 785 in February 2021. "I would assume it is directly related to the situation of the canal," a bunker supplier said. "Waiting ships take more quantity, avoiding having to stop again, optimizing their trip after final transit." Additional total volume loaded per ship from November 2023 to March 2024 averaged 86.8 mt higher year on year, or 10.52% more. Expectations for more transits With the May-December rainy season arriving in Panama, the Panama Canal Authority said it would increase to 24 from 17 the number of daily transits through the Panama Locks by May 16, after scheduled maintenance work at the Gatun Locks earlier in the month. By June 1, it expects to increase daily transits to 32, getting closer to a historical average of 36. It will also increase on June 15 the maximum permitted draft or vessels transiting the Neopanamax, to 45 feet from the current 44. The expected increase in transits has already started to bolster bunker demand in Panama, according to the trading source. March sales figures show slight signs of recovery, and market participants expect a slight increase in April's volume, when the data is released in the next few days. Bunker sales reached in March their highest sales volume in the current year, totaling 390,678 mt, 10.5% higher than in February, although 16.4% lower than 467,425 mt in March 2023. These figures were supported by higher sales of the high sulfur 3.5% grade, which reached 114,229 mt in March, their highest volume in six months. Panama continues to be a key market for the 3.5%S bunker fuel, currently only allowed to be used by ships fitted with scrubbers. Its sales in March represented 29.24% of the total sales volume.