Trading patterns for Canadian iron ore and US coal bound for Asia are changing as bulkers reroute to avoid the Red Sea, analysis shows.
Research by Braemar Shipbroking says that vessels carrying these cargoes from the North Atlantic have increasingly opted to make their way east via the Cape of Good Hope over the past four weeks, rather than via the Suez Canal and Red Sea as usual.
The research found about 59 fewer bulkers transited through Suez in the four weeks to 14 January, compared with the preceding four-week period. Sixty vessels went east via the Cape.
But increasingly widespread avoidance of the Red Sea area could have implications for vessel supply to the Mediterranean, Black Sea and North Atlantic regions. Things could get tight.
The Suez Canal and Red Sea have been an important artery for backhaul trade, particularly in respect to coal originating from Australia, China, Indonesia and India. Such long-haul voyages for thermal coal became increasingly commonplace in 2022 as European importers looked for cost-competitive international suppliers in the wake of trade sanctions on Russia.
But European countries imported less thermal coal overall during 2023 than in the previous year, which will mean fewer bulkers redelivering to the market in the Mediterranean, Black Sea and North Atlantic after backhaul voyages.
“Therefore, any squeeze in bulker supply into the North Atlantic as a result of Red Sea avoidance, either laden vessels or those in ballast, could magnify the tightening effect on vessel supply of the drops in thermal coal imports into Western Europe from 2022,” Braemar said.
Germany, as one example, imported almost 40% less coal during the first 11 months of last year than it did during the same period of 2022, down by 11.2m tonnes to 17.4m tonnes, Braemar said, citing official trade data.
Red Sea trades account for 12% of bulker demand in terms of tonne-miles or 7% in terms of global seaborne dry bulk trade, Braemar said.
“From the perspective of additional voyage length, grain shipments from Romania and Ukraine face the largest gains if the Red Sea is avoided,” Braemar said in its report.
Trade from Russia could go unscathed by escalating violence in the Red Sea. Last year, Russian cargoes accounted for the largest proportion of dry cargo trade that made its way through the Suez Canal, accounting for some 93m tonnes. Over half of this was coal.
Yemen’s Houthi rebels said on 19 January that ships with identifiable “links” to China or Russia would not be attacked in the Red Sea area.
However, cargoes from the US and Canada were the next largest proportion of dry bulk trade through Suez last year. North American coal and iron ore cargoes totalled almost 60m tonnes, Braemar said.
