Global shipping chaos is leading to huge additional economic costs for imports and exports and in terms of shipping liquefied natural gas spot charter rates for West of Suez and East of Suez have plummeted.
London shipbrokers said shipping spot charter rates for West of Suez slumped this week because of the Red Sea crisis by $40,000 per day to $105,000 per day.
Rates for East of Suez tumbled by $30,000 per day to be at $75,000 per day because of extra cargo and fuel costs stemming from having to take longer delivery routes around the Cape in South Africa,
Charter demand has also been seriously affected because clauses in time-charter agreements exclude the deliberate entry into “war zones” that would affect hull, cargo and crew insurance.
LNG carriers from Qatar are continuing to use the Suez Canal and one that has just delivered to Italy’s Adriatic LNG import terminal was well on its way back to Ras Laffan.
Vessels carrying LNG from the Atlantic Basin via Suez had been less frequent before the crisis and are not expected to be re-using the Suez route anytime soon.
Containership costs soar
An example of the shipping chaos in terms of financial costs are the measures and cost adjustments having to be taken by companies like France’s Marseille-based group CMA CGM, which runs one of the largest containership fleets and many of whose vessels are powered by LNG.
CMA CGM has been forced to raise its tariffs for customers because of the Red Sea and Suez Canal shipping disruptions caused by terrorism and those on the Panama Canal caused by drought.
CMA CGM is one of the groups that has halted its ships from entering the Red Sea, and thus the Suez Canal, because of the dangers of terrorist missile attacks from Iran-backed Houthi rebels in Yemen.
One of the company’s vessels, the “CMA-CGM Jacques Saade”, the world’s first LNG-powered very large containership with 23,000 twenty-foot equivalent unit containers, normally travels to and from Asia via the Suez Canal on the Asia trade route.
The vessel was heading for the Moroccan port of Tangiers on December 21 after travelling from the East Mediterranean just after the company stopped using the Suez Canal that took its vessels past Yemen on the Red Sea route.
“In continued efforts to ensure the safety of our crew, vessels, and your cargo amid the ongoing developments in the Red Sea region, we would like to provide you with important information regarding the re-routing of several vessels from their intended route to through the Cape of Good Hope (South Africa),” said CMA CGM.
“As highlighted in our previous Customer Advisory, the re-routing of these vessels is a precautionary measure taken to navigate away from potentially unsafe areas,” explained the company.
“This decision is in line with Clause 10 of our Bill of Lading, and while we understand it may impact your logistics and supply chain operations, it is a necessary step which comes with a cost,” stated CMA CGM.
Red Sea ports
“Accordingly, we hereby inform you that, effective immediately and until further notice, a Red Sea Charge will apply to all cargo to and from Red Sea ports unless you decide to accomplish the Bill of Lading at the designated hub ports,” the company explained.
The Red Sea Charge details are as follows: US$1,575 per 20-foot Dry, $2,700 per 40-foot Dry and $3,000 per Reefer container and special equipment.
The scope of these charges relate to routes for already-agreed cargoes that traditionally past Jeddah, the Port of Neom, Djibouti, Aden, Hodeidah, Port Sudan, Massawa, Berbera, Aqaba and Sokhna
“The date of application is December 20th, 2023 for cargo on board or to be loaded/ discharged to/from Red Sea, said the company.
Panama Canal
The company also informed its customers in November 2023 that the severe drought and further transit restrictions affecting the Panama Canal had taken a “severe toll” on operations so that consequently CMA CGM prices had to be increased from January.
The company noted that during the year, and despite several water conservation measures, the Canal draft was reduced from 14.94 metres to 13.41 metres (44 feet).
“The lack of precipitation over the summer months has forced the Panama Canal Authority to reduce the number of vessels transiting per day,” CMA CGM explained.
“As a consequence, by January 1st 2024, the booking windows for transiting the Neopanamax locks will be reduced by 30 percent,” said the company.
“These restrictions combined with an increase in the Canal Tariff implemented earlier in the year, are taking a severe toll on CMA CGM’s operations,” stated CMA CGM.
“Therefore, please note that CMA CGM will apply a US$150 per Twenty-Foot Equivalent unit (TEU) Panama Adjustment Factor starting on January 1st, 2024,” the company told customers.
