Marine Reinsurance Firms Expect Giant Suez Blockage Claims
by Carolyn Cohn (Reuters) – The recent blockage of the Suez Canal is likely to lead to large reinsurance claims, adding to upward pressure on marine reinsurance rates, James Vickers,...
By Aaron Clark (Bloomberg) –A back-of-the-envelope calculation shows there’s about $9.6 billion worth of daily marine traffic halted by the massive container vessel that lodged in the Suez Canal earlier this week, blocking transit in both directions.
The figure is based off an assessment by Lloyd’s List that suggests westbound traffic is worth around $5.1 billion a day and eastbound traffic approximately $4.5 billion. The industry journal concedes that these are “rough calculations,” however. There are about 185 vessels waiting to transit the waterway, data compiled by Bloomberg show, while Lloyd’s estimated 165.
Related Article: Ships Carrying Commodities Stuck After Suez Canal Grounding
So far efforts by tugs and diggers to dislodge the Ever Given — the 400-meter long vessel that became wedged in the canal on Tuesday — have failed and work to re-float the ship has been suspended, shipping agent Inchcape said, citing the Suez Canal Authority.
AP Moller-Maersk A/S, Mediterranean Shipping, Ocean Network Express and Yang Ming Marine Transportown vessels in the canal, according to S&P Global Market Intelligence unit Panjiva, which cited VesselFinder data. About 50 ships per day use the waterway, and in 2019 containers accounted for around 53% of the transiting tonnage, it said.
Approximately 13 million barrels of crude on 10 tankers could be affected by the disruption, according to Vortexa Senior Freight Analyst Arthur Richier. There are also nine vessels carrying clean petroleum products, along with biodiesel, sitting outside Suez, awaiting the resumption of northbound convoys, he said.
Just how long it takes to move the ship and clear the gridlock will dictate further impacts on markets. About 300 vessels globally are either stuck in the Suez Canal, waiting to transit the waterway or signaling it as their next destination, according to shipping data compiled by Bloomberg.
As of Wednesday, the queue included 40 bulk carriers hauling commodities ranging from crops to dry goods like cement as well as vessels carrying oil, fuel, and chemicals, Bloomberg data show. There were also eight ships carrying livestock, more than 30 general cargo vessels, and a water tanker.
There may only be one liquefied natural gas tanker stuck inside the Suez Canal behind the marooned Ever Given, but there are already signs the blockage is beginning to disrupt global LNG flows.
The Golar Tundra, which loaded the gas in Egypt, was scheduled to arrive in Pakistan by the end of the month until the hold-up in the canal, according to traders with knowledge of the matter. The South Asian nation is now in discussions with its supplier about finding an alternative cargo, they said.
Apart from the Golar Tundra, there are seven LNG tankers near the entrances to the canal, according to ship-tracking data compiled by Bloomberg. Around 8% of the global supply of the fuel passes through the vital waterway, and the only other option is a trip around Africa that would add weeks to the journey.
At least one shipment of LNG from the U.S. may have diverted course toward the Cape of Good Hope and away from Suez, Lucas Schmitt, an analyst at Wood Mackenzie Ltd. said in a note on Thursday.
Still, most traders are betting that the issue will be resolved within a few days, and delays have had only a minimal impact on prices. While the closure could postpone shipments and curb some supply, end-users are sitting on enough inventories to be able to weather a short-term disruption. And a shift to milder spring temperatures in Europe and Asia means heating demand has ebbed.
By Aaron Clark, Stephen Stapczynski, and Anna Shiryaevskaya. Copyright 2021 Bloomberg
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