Ships are anticipated to increase refueling operations at Singapore and Rotterdam, the two busiest bunkering ports with competitive fuel prices. This strategy is seen as a precautionary measure by shipowners and operators seeking to hedge against uncertainties stemming from alterations in shipping routes, according to industry analysts and traders.
Tensions in the Middle East have escalated due to attacks by Yemen's Houthi militia on merchant ships in the Red Sea, coupled with retaliatory strikes by the U.S., all unfolding against the backdrop of the ongoing Gaza conflict. The Houthi attacks, purportedly in support of Palestinians, target a route that constitutes approximately 15% of global shipping traffic, serving as a crucial link between Europe and Asia. In response to the increased threat of drone and missile attacks by the Houthis, hundreds of large vessels have opted to reroute around the southern tip of Africa, resulting in an additional travel time of 10-14 days.
According to data from bunker supplier Integr8 Fuels, prices of low-sulphur bunker fuel delivered at Cape Town have risen by 15% to nearly $800 per metric ton since mid-November when the attacks commenced. Philip Wang Balke, a senior bunker trader for Africa at Integr8, noted the tightening supply situation as more shipowners and operators proactively secure fuel in advance to ensure an adequate supply.
The shift away from the Red Sea initially observed among container ships is now extending to oil tankers and dry bulk carriers, redirecting bunker demand to West Mediterranean ports at the expense of East Mediterranean facilities, industry sources revealed.
John A. Bassadone, founder and CEO of independent bunker supplier Peninsula, highlighted the consequences of this shift in shipping patterns, stating, "Ships are diverting away from the Red Sea and re-routing around the coast of South and West Africa – this increased traffic has created huge congestion in bunkering ports around Africa and placed significant pressure on port infrastructure," in an interview with Reuters. Bunker fuel demand has surged at various ports, including Port Louis in Mauritius, Gibraltar, and ports in the Canary Islands and South Africa, with notable spikes in sales reported in Cape Town and Durban.
"We are anticipating increased demand in Las Palmas and Western Mediterranean ports as it's likely the African ports will exceed capacity," warned Peninsula's Bassadone. While Singapore and Rotterdam have not yet experienced a surge in demand, industry insiders expect an uptick in buying over the coming weeks as ships seek to procure fuel at competitive prices. An Asia-based bunkering manager suggested that vessels, especially those facing higher uncertainties, are likely to fill up their tanks in advance, anticipating potential costlier ports, allowing them to save costs by buying less fuel due to the surplus acquired in Singapore.