Global Risk Management on Red Sea crisis: Demand for bunker fuels will increase due to longer voyages

The demand for bunker fuels will increase due to longer voyages and possible higher speed of sailing following the Red Sea crisis, says Arne Lohmann Rasmussen from Global Risk Management on Thursday (21 December).

The customised hedging solutions provider is part of the Danish USTC Group with its sister companies including bunker supplier Bunker Holding and tanker shipping firm Uni-Tankers. Global Risk Management also has an office in Singapore, besides its headquarters in Middelfart and Copenhagen office. 

“Our sourcing operation already reports rising demand in African ports, whereas the operations in ARA and Asia seem less impacted,” he said in a social media post while presenting a chart deck he used for a weekly internal meeting with Bunker Holding Group. 

“This is no surprise as the vessels are heading for Africa, passing Cape Town, and have not yet reached Europe after the long voyage south of Africa.”

According to the chart deck, shipowners will be forced to sail around the South of Africa without access to the Suez canal, adding at least 10 days to journey times, equating to around 250-420 mt extra bunker demand for LR2s (115k dwt). This was according to analysts at S&P Global Commodity Insights.

“S&P Global analysts estimate that engine power limitation, a favoured cost-cutter among vessel operators, reduces fuel consumption by 30%-40%, meaning higher speeds could produce dramatic demand shifts,” it said.

It has been reported that recent attacks on vessels has forced big shipping firms including Maersk, Mediterranean Shipping Company and CMA CGM to reroute around the Cape of Good Hope to avoid the Suez Canal, which is the shortest shipping route between Europe and Asia.

Photo credit: Global Risk Management
Published: 21 December, 2023