That’s Two for Two: The World’s Other Big Canal Is in Trouble

livemint.com:

Global trade is under threat again. This time from missile attacks linked to the Israel-Hamas war targeting commercial ships passing through the Red Sea, near the Suez Canal. That may force many vessels to take the longer but safer route around Africa and is boosting oil prices.

For shipping owners, the development both gives and takes away: Clients will be forced to pay up for higher rates, but shippers will also have to absorb higher fuel costs. Tanker and liquid petroleum gas shippers look best placed since capacity utilization is tight and trouble at another major canal—the one in Panama—has already given them a huge boost in bargaining power. Brent oil prices rose around 1% on Tuesday, according to Refinitiv data.

Shares of A.P. Moller-Maersk, a top global container shipper, were down over 3%. Shares of Dorian LPG, a major LPG shipper, were up nearly 2%.

Oil giant BP on Monday became the latest company to halt its tankers from sailing through the Red Sea. Many of the world’s biggest shipping lines, including Maersk, Hapag-Lloyd and MSC have started diverting vessels from the region. These new attacks are compounding disruptions to global trade already suffering from a historic drought in the Panama Canal.

Jefferies estimates container fleet utilization could surge from 77% to 88% and oil product tanker capacity could become entirely booked up—it is already high at a 95% utilization rate. A containership traveling from the Far East to Europe takes 21 days via the Suez Canal but 42 days if going around Africa, according to the bank. A tanker from the Middle East takes 17 days to get to Europe using the Suez Canal but 41 days if going around Africa.