Qatar’s LNG-laden tankers resume Red Sea operations despite Houthi threats to trade
▶ Several vessels scheduled to cross Bab Al Mandeb paused for several days amid geopolitical tension
Several tankers transporting Qatari liquefied natural gas (LNG) have resumed sailing through the Red Sea after pausing for several days amid rising geopolitical tension.
Four vessels have resumed course through the critical trade route, which carries about 12 per cent of global shipping traffic, according to live updates from the Marine Traffic ship tracker yesterday.
The LNG tanker Al Rekayyat has resumed its journey through the Red Sea and is en route to Qatar, the data indicates. It had been halted on its Red Sea route since January 13.
The vessels Al Ghariya, Al Huwaila and Al Nuaman, carrying Qatari LNG, are on the move, but they have altered course to the south, despite still signalling the Suez Canal as their destination, the data showed.
The three tankers cut their speed on Sunday and started circling off the coast of Oman, east of the strait, Alex Froley, LNG analyst at ICIS, said. Al Rekayyat, which was returning to Qatar, cut its speed on Saturday and was paused in the middle of the Red Sea, he said.
QatarEnergy did not respond to The National’s requests for comment.
Major shipping companies have suspended their operations in the Red Sea after missile attacks by Yemeni Houthi rebels, who say they are acting in solidarity with Palestinians, disrupting global trade as Israel’s war in Gaza rages on.
US warplanes shot down a cruise missile fired by Houthi rebels at one of its warships in the Red Sea on Sunday.
Last week, the US and the UK launched air strikes on Houthi military positions across Yemen, pledging to protect the the Red Sea voyage.
“In the past couple of weeks, most LNG tankers have started to avoid the Red Sea and divert around the Cape of Good Hope instead,” Mr Froley said in a LinkedIn post.
“It could take a Qatari cargo around 27 days to reach northwest European countries like the UK going around South Africa, compared with 18 days going through the Suez Canal.”
The Suez Canal is a major artery for global trade, with significant LNG exports mainly consisting of deliveries from Qatar to Europe and exports from the US and Russia to Asia.
In 2022, Qatar’s LNG trade with Europe through the canal stood at 19.84 million tonnes, ahead of the second-largest trade flow from the US, according to Rystad Energy data.
Last year, the Gulf country exported 13.74 million tonnes of LNG to the continent.
Since the move away from Russian gas supplies by much of Europe following its invasion of Ukraine, there has been a greater reliance on LNG supplies, including from the Middle East, said Philip Chong, partner in the International Arbitration team at law firm Ashurst.
“These disruptions therefore take place in the context of an already tight market,” he said.
“The facilities to store gas is limited in many European countries such as the UK, which means that any supply disruptions cannot be made up wholly of storage gas and accordingly can give rise to significant fluctuations in market prices.”
Dutch Title Transfer Facility gas futures, the benchmark European contract, were trading 6.46 per cent lower at €29.92 ($32.65) per megawatt hour yesterday.
“High gas storage levels and some mild weather this winter means the market is resisting the impact of the latest news,” Mr Froley told The National. “If the route can’t be used for a long time, this will in the longer-term have a bullish impact pushing prices up.”
In the event that LNG shipments cannot be delivered, contractual leeway could be used to find an alternative source of gas, Mr Chong said.
However, this can be difficult in the context of rising prices in a tight market and gives rise to the issue of who bears the loss.
“In terms of legal remedies for cargo owners and shipowners, these centre largely around contractual provisions relating to force majeure and other contractual measures for suspension and/or variation,” he said. The Red Sea is linked to the Mediterranean by the Suez Canal, making it the shortest shipping route between Europe and Asia.
With global container shipping companies forced to reroute their vessels due to the Houthi attacks, shipping costs have increased and schedules have been disrupted.
The Asia-Europe corridor will face “the most acute delays” given the scarcity of viable alternatives to the essential Suez Canal and the intricate nature of sea-based logistics, according to a BMI report.
Maritime freight prices will stay high in the first quarter of 2024, largely led by the Asia-Europe rates, as the risks in the Red Sea region remain, despite the setting up of a US-led naval protection force and recent counterstrikes, the report said.
On January 11, the Drewry’s World Container Index rose by 15 per cent on a weekly basis to $3,072 per 40-foot container, reflecting a 44 per cent annual increase.
BMI said the Red Sea disruptions would have a domino effect on other shipping routes and key global manufacturing supply chains if the issue was not resolved soon. “The Red Sea crisis is having a global ripple effect on freight rates with shipping costs between Asia and the US now spiking as well.”
Shipping companies are now proactively dispatching goods well in advance of the Lunar New Year holiday in China – which starts on February 10. This will probably result in capacity constraints and potential bottlenecks during the weeks leading up to the end of January amid equipment and container shortages, BMI said.
There is a “notable rise” in demand for containers in China and South Asia as well as in container trading spot rates ahead of the Chinese New Year, according to Container xChange. The average price on China-Europe quoted this week is about $5,400, up from $1,500 just the week before, it said.
Four vessels have resumed travel through the trade route, which carries about 12 per cent of global shipping traffic