It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
Only two new supertankers are expected to join the global fleet in 2024, the lowest number in forty years.
Houthi attacks on commercial shipping and airstrikes by the US and UK have forced tankers to navigate around Africa, leading to longer sails and tighter capacity on the seas.
Tanker rates have surged, and the tanker order book is expected to remain extremely low in the coming years, exacerbating the shortage.
The Red Sea shipping crisis has been an explosive mess for the international shipping community and the global economy. With oil tankers increasingly steering clear of the southern Red Sea and the Bab el Mandeb Strait, shipping capacity has rapidly tightened, pressuring daily rates higher.
Bloomberg reports only two new supertankers will join the global fleet in 2024, the fewest additions in forty years and about 90% below the yearly average over the last two decades.
"The impact of the diversions can be seen every day in shipping in general, and I would say crude oil and product tanker shipping," specifically, Alexander Saverys, CEO of Euronav NV, one of the largest tanker owners in the world, told investors during an earnings call earlier this month.
Saverys said low deliveries and an aging global fleet are a perfect recipe for a positive outlook on tankers.
We have stated that Houthi attacks on commercial shipping are the "next supply-driven inflation shock." As a result, a key Clean Tanker rate tracked by the Baltic Exchange has moved north of $100,000 per day due to the disruptions, caused longer sails, which tightens capacity on the seas.
The US and UK airstrikes on Houthi militants in Yemen were one of the major drivers that sent tanker rates soaring in the second half of January. Many of these tankers, hauling fuels like gasoline and diesel, have been forced to navigate around Africa.
Charts from the latest Goldman Oil Tracker (full report available to pro subscribers in the usual place) show flows through the Bab-El-Mandeb continue to deteriorate and remain down 1.8mb/d (or 27% on a 14DMA Basis) since disruptions started on December 18.
Goldman also shows tanker rates have surged.
"The situation is tight in the tanker market, in particular for crude oil tankers," said Enrico Paglia, research manager at Banchero Costa, a shipping services firm. He warned, "It will be even tighter in the future."
Bloomberg noted, "The tanker shortage comes as the efficiency of the global fleet is faltering. In addition to many vessels sailing around southern Africa instead of through the Red Sea and Suez Canal, a burgeoning dark fleet means that many ships are only available to certain customers."
Meanwhile, data from Banchero Costa shows the tanker order book will be extremely low in the next couple of years: Only five new tankers are expected to join the global fleet in 2025. That compares with 42 ships delivered in 2022.
How long until the next tanker glut?
By Zerohedge.com
Video: Rubymar’s Position is Precarious as Ship Becomes Political Pawn
Rubymar in an undated video from Al-Jumhuriya TV (Youtube)
Dramatic video of the crippled bulker Rubymar appeared on TV news reports in Yemen showing the increasingly precarious state of the vessel 10 days after it was struck by a Houthi-launched missile. Efforts to mount a salvage continue to be hampered by the instability of the region and the competing political interests while some reports suggest at the rate the vessel is settling it could be days before it loses sufficient buoyancy to remain afloat.
The video shows the 32,200 dwt bulker (564 feet/172 meters in length) having settled further at the stern. Images obtained by the BBC last week showed the stern deck just barely above the water but in the undated video, it has clearly slipped below the water level. U.S. Central Command warned on Friday that the vessel was still leaking fuel oil and taking on water.
The vessel is also reported to be drifting to the north in the Red Sea despite the earlier indications that it was anchored. It has traveled approximately 37 nautical miles since the reported position when it was struck according to data analyzed by the British news outlet Sky News. They are citing navigational warnings saying the vessel is unmanned and drifting.
The manager of the vessel Blue Fleet Group told Sky News it was working on plans for the salvage that would include an attempt to stop the fuel leak and tow the ship. They reported the U.S. Navy had offered assistance and said talks are ongoing to find a port willing to accept the ship. Reports have suggested the Rubymar flagged in Belize and linked to UK and Lebanese interests might be towed to Djibouti or Saudi Arabia.
The government of Yemen made statements on Monday saying it was working on the salvage. They said they would be willing to bring the ship to port. Yemeni Water and Environment Minister Tawfeeq Al-Sharjabi made the statement at a press conference in Aden according to the Saba state news agency. He expressed concerns over the environmental issues if the vessel is permitted to sink.
The Houthi leader, Muhammad Ali Al-Houthi, however, took to X (Twitter) writing on February 24, “It is possible to tow the sunken British ship in exchange for bringing relief trucks into Gaza. This is an offer that can be studied.”
Environmentalists are expressing concern citing the report from CENTCOM saying the cargo is 41,000 tons of fertilizer. They highlighted the 18-mile oil slick from the vessel while saying the fertilizer could spill into the Red Sea and worsen this environmental disaster. Earlier reports suggested the ship’s owner was hopeful to salvage the vessel and transfer the cargo to another vessel.
The ship appears to be in increasing danger while reports said salvage companies are concerned about attempting any efforts due to further threats from the Houthis. U.S. officials however have suggested a ceasefire might be put into place in Gaza to coincide with the start of Ramadan on March 10, assuming the vessel could stay afloat that many days without intervention.
Late yesterday, CENTCOM reported U.S. forces took out a range of weapons all ready to be launched following the larger U.S. and UK raids on Sunday. On Monday, U.S. forces destroyed three unmanned surface vessels (USV), two mobile anti-ship cruise missiles (ASCM), and a one-way attack unmanned aerial vehicle (UAV). In a followup on Tuesday, CENTCOM said that American and allied forces shot down another five UAVs over the Red Sea.
surer who will cover the war risk while the vessel is holding station off Yemen.
U.S. and UK Sanction Iranians, Houthis and "Dark Fleet" Tankers
The U.S. and UK listed individuals and tankers involved in the Iranian oil trade and for supporting the Houthi (file photo)
In a coordinated series of efforts, the United States and the United Kingdom each launched new sanctions against Iran and its commodities trade as well as for efforts supporting the Houthi militants in Yemen. The U.S. and UK jointly targeted the Houthi and their Iranian supporters while the U.S. also took action against two companies registered in Hong Kong and the Marshall Islands that own and operate a tanker used in the Iranian oil trade.
“Today’s action underscores our resolve to target efforts by the IRGC-QF (Iranian Islamic Revolutionary Guard Corps Quds Force) and the Houthis to evade U.S. sanctions and fund further attacks in the region,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson. “As the Houthis persistently threaten the security of peaceful international commerce, the United States and the United Kingdom will continue to disrupt the funding streams that enable these destabilizing activities.”
The joint U.S.-UK action sanctioned two individuals and three organizations that were reported to be providing financial or military support to the Houthis. Among the individuals being listed is Mohammad Reza Fallahzadeh, who since April 2021 has been reported to be the Deputy Commander of the IRGC Quds Force and responsible for multiple attacks as well as support for the Houthi. The UK also joined the U.S. which had previously listed Sa’id al-Jamal, an Iran-based financier who heads a network of front companies and vessels that generate revenue for the Houthis. Both countries also listed three units of Iran’s Quds Force.
The UK also listed Ali Hussein Badr Al Din Al-Houthi, the Houthi’s Undersecretary of the Interior and Commander of the security/police forces. The U.S. also designated Ibrahim al-Nashiri, a Houthi group member who supports the militant efforts.
As with the past efforts, the U.S. also singled out tankers involved in the Iranian oil trade. Today’s action listed the Artura, a crude oil tanker registered in Panama. Built in 1998, the vessel is 150,000 dwt and is reported to have been working for the network operated by Sa’id al-Jamal including operating ship-to-ship transfers and using multiple names including Sanan II. The U.S. traced the ship to a transfer to the Mehle (150,000 dwt) another tanker the U.S. sanctioned in January 2024. Cap Tees Shipping, the owner of the tanker, was also listed.
In a separate action, the U.S. also took action against companies in Hong Kong and the Marshall Islands that own and operate another tanker, the Panama-flagged Kohana (318,600 dwt). Built in 2003, the U.S. reports the tanker has been used to ship over $100 million in Iranian commodities to businesses in China.
The U.S. linked this tanker to operations orchestrated by Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL). The U.S. reports the vessel loaded a cargo for Iranian oil in late January 2024 and is on its way to China, where it intends to offload its cargo.
The UK’s Foreign Secretary David Cameron commented saying, “As I have made clear to the Iranian Foreign Minister, the regime bears responsibility for these attacks due to the extensive military support it has provided to the Houthis. All those who seek to undermine regional stability should know that the UK, alongside our allies, will not hesitate to act.”
To date, the UK reports it has more than 400 sanctions designations in place on Iranian individuals and entities, including those that seek to use malign influence regionally and internationally.
Fearing Long-Term Problems in Red Sea, Cruise Lines Change Plans
Virgin Voyages has canceled its entire 2024-2025 Australia cruise season, citing the problems in the Red Sea (Virgin Voyages)
The cruise industry is starting to rethink its plans into 2025 as increasingly they believe the problems in the Red Sea will persist. It is a view shared by the commercial shipping industry, but with travelers making vacation plans cruise lines need to think longer term to reduce disruption to their schedules and inconvenience to their passengers.
“Based on the regional and government advice we have received, we remain very concerned about potential escalations in the Red Sea over the next 12 months,” Richard Branson’s Virgin Voyages wrote in a new announcement. “This significant and ongoing conflict puts unacceptable risks for safe passage through the region for our sailors (passengers), crew, and vessel (Resilient Lady). As a result, we have been left with no choice but to cancel our 2024/25 voyage season plans for Resilient Lady.”
While the cruise industry is working on a longer time horizon to aid travelers in their planning, the underlying concern is shared broadly. Reuters reports that Maersk's head of North America, Charles van der Steene is advising the carrier’s customers, "Be prepared for the Red Sea situation to last into the second half of the year and build longer transit times into your supply chain planning."
Virgin Voyages highlights that it recently had to reroute the repositioning of the cruise ship Resilient Lady after its inaugural season in Australia. Based on the uncertainties, the cruise line has decided to entirely cancel its 2024/2025 season in Australia, impart because of the potential problems with the repositioning cruises that would transit the Red Sea. The Resilient Lady will now complete her Mediterranean sailing season on October 20, 2024, and divert course sailing to San Juan, Puerto Rico for a replacement Caribbean season for the 2024-2025 winter season.
“To say that we are disappointed to have come to this tough conclusion is an understatement,” says Virgin Voyages. “These adjustments are happening now in order to minimize potential future disruption to our passengers' holiday plans knowing there is a high likelihood that changes would need to happen in the future… We are currently working through options to return to Australia and the Asia Pacific region once regional repositioning opportunities become more tenable.”
Norwegian Cruise Line is taking a similar move writing to travelers with reservations and travel agents, “We have been monitoring the situation in the Red Sea and despite our best hopes that it would de-escalate, we have made the decision to alter published itineraries scheduled to transit through the region.”
The cruise line is canceling sailings for the Norwegian Dawn and the Norwegian Sky between October and December 2024. They appear to be planning to deadhead both ships into position in the Indian Ocean and Middle East reducing their published itineraries in November and December 2024.
MSC Cruises is also changing its 2024-2025 program for the cruise ship MSC Opera. Scheduled for the Red Sea and Middle East, the cruise ship will now spend the winter season in the Canary Islands. The cruise line announced it will be substituting a program of 7-night itineraries with six ports of call between November 2024 and March 2025.
Up to Four Subsea Cables Have Been Damaged Off Yemen
Just weeks after a warning about potential Houthi threats to subsea cables in the Red Sea, at least one fiber-optic line has been severed at a position off the coast of Yemen, and damage has been reported (but not confirmed) on three more.
Until last year, the Red Sea carried about one-eighth of the world's shipping traffic. Less known is its importance to the functioning of the global internet. 16 small fiber-optic lines under the Red Sea handle about 17 percent of all international data traffic, including trunk lines connecting Europe with India and East Asia. Some of these lines are in relatively shallow water depths of as little as 300 feet, where they could be accessible to divers.
The Houthi movement is well aware of this opportunity. Earlier this year, a Houthi social media account posted a map of these cables, along with a note that the density of telecom infrastructure made Yemen "strategic." The internationally-recognized government of Yemen issued a warning of the potential Houthi threat to these subsea assets earlier this month, and has reportedly discussed it with telecom operators in the past.
On Monday, Israeli news site Globes said that cables belonging to four major telecom networks - including the Asia-Africa-Europe 1 (AAE-1), TGN Atlantic, Europe India Gateway and the Seacom system - have been damaged in recent months.
Seacom has confirmed that its cable between Egypt and Kenya was severed on February 24, though the firm told Bloomberg that it is still too early to know if this was a deliberate attack.
Seacom warned that repairs could be delayed due to "instability in the area," and said that its team was working on a timeline for service restoration. The challenges will include finding a cable ship owner who is willing to operate within range of Houthi ballistic missiles, as well as an insurer who will cover the war risk while the vessel is holding station off Yemen
Houthi Red Sea Attacks Are Boon for Pirates as Ships Reroute
The Red Sea shipping crisis has forced ship operators to re-route.
Unfortunately, resurging attacks coming from notorious piracy hotspots have shipping companies worried about the new route.
It’s unlikely that surging piracy on African waters will persuade shipping companies to return to the Red Sea any time soon due to the even higher risk of facing Houthi attacks
Since November, Yemen's Houthi rebels have repeatedly attacked cargo ships passing through the strait of Bab al-Mandab that splits north-east Africa from Yemen on the Arabian Peninsula. The Iran-backed rebels have been targeting vessels with connections to Israel and Western countries, forcing dozens of shipping companies to take a 4,000-mile detour around the continent of Africa at significantly higher costs and extra shipping days.
Unfortunately, resurging attacks coming from notorious piracy hotspots have shipping companies worried about the new route. Arsenio Dominguez, secretary-general of the International Maritime Organization, has warned shipping companies to be on high alert for piracy after vessel seizures in the Gulf of Guinea and off the Somali coast.
Dominguez has urged companies to return to the stringent security levels of the previous piracy crisis, “They need to be more in line with how they were back in 2008 to 2012 off Somalia. We’re having conversations to create awareness surrounding the Gulf of Guinea . . . with the increased traffic in the region, we should avoid new escalation or increased incidents of piracy,’’ he said.
One vessel hijacked in December remains off the Somali coast, while pirates briefly seized another bulk carrier the following month before it was freed by the Indian navy.
On Friday, Houthi rebels attacked and set ablaze a cargo ship traveling through the Gulf of Aden. Last month, a tanker’s crew was kidnapped off Equatorial Guinea by pirates. On February 19, the crew of a dry bulk carrier sailing on Somali waters was forced to abandon ship after a missile attack. The ship’s Beirut-based owner says the vessel was listing and in danger of sinking. However, the shipping company is working with a salvage company to have the ship towed to Djibouti. Related: Red Sea Chaos To Have Limited Effect On LNG Prices
The Gulf of Guinea and Somalia’s Gulf of Aden were once considered some of the most dangerous piracy zones for oil companies and other seafarers with a wave of piracy peaking in 2018. What makes these places particularly vulnerable is a lack of sufficient equipment and manpower as well as the fact that attacks are mainly staged far off coastlines beyond countries' territorial jurisdictions. Further, the Gulf of Guinea is rich in oil and gas as well as a relatively well-trained militia that has honed its skills fighting in the Delta's secessionist movement. In the past, pirates operating in the Gulf of Guinea have targeted human capital instead of hijacking ships.
The Gulf of Mexico remains another piracy blackspot due to its abundant oil and gas resources, although pirates there are mostly associated with local crime groups rather than cartels and prefer stealing valuable equipment and materials instead of targeting tankers and larger vessels.
Thankfully, the African menace was largely eliminated by the adoption of on-board security measures, including traveling with armed guards. Some coastal states have also adopted more rigorous anti-piracy action.
Western, Israeli-Linked Ships Paying 50% Extra Insurance Premiums
It’s unlikely that surging piracy on African waters will persuade shipping companies to return to the Red Sea any time soon due to the even higher risk of facing Houthi attacks coupled with exorbitant insurance premiums being levied on ships plying the Red Sea.Underwriters have started charging ships linked to U.S, British and Israeli companies as much as 50% extra in war risk premiums to navigate the Red Sea due to the persistent threat of attacks. The war risk premiums for Red Sea voyages now hover at ~1% of the value of a ship, up from around 0.7% previously, with additional costs translating into hundreds of thousands of dollars for a seven-day voyage.
“The ships that have so far had problems, almost all of them have some element of Israeli or U.S. or U.K. ownership in there somewhere,” Marcus Baker, global head of marine and cargo with Marsh, has told Business Insurance.
The Yemeni rebels have been relentless with attacks on commercial ships despite counterstrikes by the U.S. and British navies, and have vowed to continue doing so. “The Houthis persist in upholding their religious, moral, and humanitarian duties towards the Palestinian people and in defense of their beloved Yemen in the face of American-British aggression. Military operations will not stop unless the aggression stops and the siege on the Palestinian people in the Gaza Strip is lifted,’’ Houthi Brig. Gen. Yahya Saree said in a pre-recorded statement on Thursday
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