In February, shipping rates for Very Large Crude Carriers (VLCC) reached their highest levels since November 2023, rising 3.5% month-on-month to $48,171/day, amid heightened geopolitical tensions and disruptions in the Red Sea region. Aframax and Suezmax rates, however, experienced a decline during the same period.
Aframax vessels have a capacity of around 120,000 deadweight tonnes, while Suezmax tankers have a capacity of approximately 180,000 deadweight tonnes, making them the maximum size vessels that can traverse the Suez Canal. The increased oil trade has led to the utilization of larger vessels like the VLCC, with a capacity of up to 320,000 deadweight tonnes.
The tensions in the Red Sea region have forced some vessels to take longer routes around Africa, impacting shipping rates. The United Nations Conference on Trade and Development (UNCTAD) highlighted the significant economic implications of these disruptions on global supply chains and warned of potential delays, higher costs, and inflation for consumers.
The Baltic Dry Index, measuring the cost of transporting dry bulk commodities globally, increased by 5.7% in February. Moody’s Investor Services suggested that the impact on inflation may be limited by low demand and high ship availability.
As of February 20, 2024, the transit trade volume in the Suez Canal showed a declining trend, according to Port Watch, a collaborative project between the International Monetary Fund and the University of Oxford. The seven-day moving average was 1,878,826, indicating potential long-term effects on global trade and supply chains.
Source: Business Standard