HAMBURG- More ships carrying grain were diverted from the Suez Canal to sailings around the Cape of Good Hope this week as concern about attacks on vessels in the Red Sea continued, shipping analysts said.
“Another 13 vessels were diverted this week taking the total cargo diverted away from the Red Sea route to around 5.2 million metric tons of grains in about 90 ships since the attacks started late last year,” said Ishan Bhanu, lead agricultural commodities analyst at data provider and analyst Kpler.
About 7 million tons per month of grain cargoes usually transit the Suez Canal into the Red Sea, but bulk and other shipping has dropped significantly as Iran-backed Houthi militants have continued attacks on shipping despite US -led air strikes on Houthi positions in Yemen.
“US and European cargoes continue to avoid the Red Sea,” Bhanu said. “Not a single vessel in the Atlantic carrying grain to Asia is heading towards the Suez Canal.”
The Atlantic shipments would include large US grain exports to Asia.
“Almost all cargo originating in the Black Sea, mainly exports out of Russia and Romania, continues to travel through Suez and the Red Sea,” Bhanu said. “Only three such vessels diverted to take the longer route among dozens sailing.”
Vessels in the Red Sea broadcast messages on the automatic identification system (AIS) to seek safe passage to show they are not involved in the Middle East conflict, including ships under Chinese ownership, he said.
Commodity traders said it was still possible to find bulk carriers for Red Sea grain shipments.
“There are shipowners willing to take the risk,” a German grain trader said. “But it is clear the air strikes and naval forces are not enough to end the attacks on ships in the immediate future.”
Meanwhile, Maersk warned that container shipping overcapacity would hit profits more than expected this year and that it didn’t see a major boost from the jump in freight rates due to Red Sea disruptions, hammering its shares.
The warning, which also led the Danish shipping giant to suspend its share buyback program, is in stark contrast with investors’ recent optimism about the sector.
Container shippers have been among the best-performing stocks in Europe this year as the re-routing of vessels following attacks on shipping by Houthi militants in the Red Sea – a major trade route – has boosted freight rates.
Maersk’s shares were down 17 percent to levels last seen before the Red Sea disruptions started in December. Shares in rival Hapag-Lloyd were around 11 percent lower.
Maersk, like other shippers, has been diverting vessels on a longer route around Africa, and some analysts had expected extended journey times and higher freight rates would outweigh a big increase in new container ships joining the market.
However, Maersk CEO Vincent Clerc told reporters that about twice as many new vessels were coming to market compared to the extra capacity required to send ships around Africa.
The pandemic boost to shipping profits resulted in a wave of new ship orders. Vessels delivered at the end of last year were used to cover the gaps created by longer sailing around Africa, but the overcapacity will only fully materialize during 2024, and be felt in 2025 and possibly into 2026, Clerc said.
“We will see that there are too many ships in the world compared to the number of containers that need to be transported,” he said. “Even if a year from now we’re still sailing south of Africa, excess capacity and pressure on prices will persist.”
Maersk, viewed as a barometer of world trade, said it expected underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of between $1 billion and $6 billion this year, compared with the $9.6 billion achieved last year.
Analysts in an LSEG poll had on average forecast an EBITDA of $6.6 billion this year.
“We assumed guidance would be conservative, but we view these figures as rather pessimistic and within our expectations prior to the Red Sea disruptions,” Jefferies analysts said in a research note.
Analysts at JP Morgan said they expected Red Sea events to boost earnings in the first quarter, but “the general state of overcapacity is likely to return as 2024 progresses” and likely continue into 2025.
Maersk said one-third of its container volumes were impacted by Red Sea disruptions. Last month, the company attempted to resume sailing through the Red Sea. Clerc said the message from the US Navy was that it currently cannot guarantee safe passage through the area. – Reuters
