Updated December 18th, 2023 at 18:47 IST
Shipping stocks surge as Red Sea traffic halted amid security concerns
Traders are banking on a prolonged disruption to this crucial route, facilitating East-West trade without the need to circumnavigate Africa.
Shipping stocks across Europe continued their upward trajectory on Monday as A.P. Moller-Maersk and other major freight companies suspended voyages through the Suez Canal in response to attacks on vessels in the Red Sea by Houthi militants in Yemen.
Traders are banking on a prolonged disruption to this crucial route, facilitating East-West trade without the need to circumnavigate Africa, potentially leading to increased shipping rates.
Maersk shares experienced a spike of up to 4.7 per cent in Copenhagen, partially retracting from earlier gains, following an impressive 8 per cent surge on Friday. As of 5:07 pm, Italian shipper D'Amico, Germany's Hapag Lloyd, and Norwegian oil tanker Hafnia saw gains ranging between 4 per cent and 7 per cent, building on last week's momentum.
On Monday, oil major BP temporarily halted all transits through the Red Sea due to security concerns.
Massimo Bonisoli, an analyst at Equita, commented on the situation, stating, "We believe that the decision to avoid the Red Sea route for crude/product cargoes will increase transport time and may put further upward pressure on freight rates if this condition persists."
The price of crude oil rose by 0.7 per cent to $77.11 a barrel, rebounding from an earlier low of $75.76.
Jefferies analysts highlighted the potential impact of ships avoiding the Red Sea and opting for the longer route around the Cape of Good Hope, noting that containers and tankers would be most affected. The Suez Canal is a vital link in global seaborne trade, and the alteration of trade patterns could lead to increased rates in various shipping segments.
Should vessels choose to circumvent Africa, a tanker from the Middle East would take 41 days to reach Europe instead of the usual 17 days via the Suez Canal. Jefferies suggested that military-supported convoys might be a preferable alternative to navigating around the Cape of Good Hope.
In response to the security situation, Maersk, MSC, and CMA CGM have all suspended container shipments through the Red Sea until further notice, contributing to the broader impact on global shipping dynamics.
(With Reuters inputs)
Published December 18th, 2023 at 18:47 IST