Global Impact: Red Sea Crisis Affects Singapore Port Operations

Tommy Patrio Sorongan, CNBC Indonesia

Friday, 01/26/2024 13:43 IWST

Photo: Singapore Harbor (MPA Singapore Youtube Screenshot)

Jakarta, CNBC Indonesia – The increasing escalation in the Red Sea has had a far-reaching impact on the world of global shipping. This ultimately has an impact on giant ports such as Singapore.

At one of the world’s busiest ports, trading companies face longer ship wait times and higher prices for refueling with low-sulphur fuel. This is because many ships sailing from Asia to Europe and the Mediterranean Sea decide to refuel at that port because they have to circle further around Africa to avoid the Red Sea.

As a result, the availability of slots for bunker barges, which supply marine fuel to ships, is running low. The crisis was also exacerbated by some operators previously converting low-sulphur barges to high-sulphur barges.

“Demand for high-sulphur fuel oil has recovered in recent years after more ships equipped with scrubbers came into service,” an industry source told Reuters, Friday (26/1/2024).

“The wait time to get the earliest slot for a low sulfur fuel barge (VLSFO) order has doubled to around two weeks, compared to the usual average of one week.”

Chief refining consultant at FGE, Ivan Mathews, said that if tensions in the Red Sea persist, the tight marine fuel market in Singapore will continue due to increased demand due to longer sailing times.

“Longer waiting times for available barges and higher freight premiums may actually limit Singapore’s bunker fuel demand from December levels as many vessels may choose to refuel at other Asian ports,” he added.

The Red Sea itself is heating up because the Yemeni Houthi militia often attacks trading ships passing through the area. They claim their action is a form of solidarity with Gaza and the Hamas militia, which is currently under repeated attacks from Israel.

This also affects the Suez Canal, which connects the Red Sea to the Mediterranean Sea. The United Nations Agency for Trade and Development (UNCTAD) said the volume of commercial traffic through the Suez Canal fell 42% in the last two months.

On an annual basis, the number of container ships crossing the Suez Canal has even fallen by 67%. Whereas previously, the canal that passed through Egyptian territory carried 20% of the world’s containers.

Tanker traffic fell 18%. Bulk cargo ship transit carrying grain and coal fell 6% and gas shipments completely stopped.

“We are deeply concerned that attacks on Red Sea shipping add to tensions on global trade, exacerbating (already existing) trade disruptions due to geopolitics and climate change,” UNCTAD Chair Jan Hoffman told reporters on January 25.

Hoffman continued that this shipping route is a very crucial situation for world trade. The situation has become even worse as other global maritime trade routes have also faced disruption, with restrictions on transit through the Black Sea since Russia’s incursion into Ukraine two years ago sending global food prices soaring.

And drought in Central America has caused water levels to drop in the Panama Canal. This significantly reduces the amount of traffic that can traverse this important route.

“Prolonged disruption to key trade routes will disrupt global supply chains, causing delays in the delivery of goods, increased costs and potential inflation,” UNCTAD warned.

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