With fuel prices at extreme low levels and Suez Canal costs high, several container operators have chosen to switch their vessels to routes around the Cape of Good Hope. According to Bloomberg, some tanker operators are now doing the same.
According to Bloomberg, when the VLCC New Vigorous arrived at the port of Antifer in northern France in early May it made a small bit of maritime history. The vessel, laden with 2 million barrels of crude, became the first in almost two years to make the voyage from Saudi Arabia to northwest Europe via South Africa’s Cape of Good Hope — a journey that takes almost twice the time as the usual route through the Suez Canal. Now at least two more VLCCs are doing the same.
“Everyone is seeking to postpone the delivery of cargoes,” as storage fills up said Peter Sand, chief shipping analyst at industry group BIMCO. “Right now, in combination with very low fuel prices, it does make sense to bring ships around the Cape of Good Hope.”
Two weeks after the New Vigorous set sail for France, another tanker, the New Harmony, embarked on the same route around Africa, vessel-tracking data compiled by Bloomberg show. Two weeks after that, a third ship, the New Pioneer, did the same.
There are other sporadic instances of long-distance voyages. Oil tankers from Europe don’t normally sail around the tip of South America, but last month the Psara I did so on its way to delivering the first Norwegian crude to the US West Coast in 11 years. The Trident Liberty is the first-ever VLCC to load Kurdish crude at Ceyhan on Turkey’s Mediterranean coast and haul it, probably to China, around the coast of Africa. Cargoes to China normally move on smaller ships through the Suez Canal.
“This is a tight market” for ships hauling oil products, said Lars Dencker Nielsen, commercial director of Scorpio Tankers Inc., on an earnings call last week The lack of vessels is enhanced by storage as well as congestion and operational constraints, and it’s “causing vessels to take longer routes, for example, vessels sailing around the Cape of Good Hope instead of transiting to Suez Canal. That’s a significant increase in voyage distance and time, which limits tonnage supply”.
VLCCs0 are too deep draughted to pass through the Suez Canal with a full cargo, so they generally discharge at a pipeline terminal near the Red Sea end of the waterway and re-load once they reach the Mediterranean. For a voyage from the Persian Gulf to northwest Europe, the journey usually takes a little more than three weeks.
BIMCO’s Sand said that with fuel costs so low, it’s perhaps cheaper to avoid the canal — where tolls can run into the hundreds of thousand of dollars — even if the journey is longer. In recent weeks, the canal has temporarily increased the rebates it grants for some ships, though not for oil tankers.