Sunken fertiliser ship ‘poses threat to marine life in Red Sea’
▶ Analysts say the loss of the carrier in the Red Sea highlights why freight ships continue to avoid the region
The sinking of the cargo ship MV Rubymar in the Red Sea could pose a long-term threat to the region’s marine life as environmental groups struggle to tackle the crisis.
The vessel sank on Saturday, two weeks after being hit by the Iran-backed Houthi rebels, who have been attacking commercial ships since November.
Experts told The National that failure to recover the sunken ship could lead to an environmental disaster, as its cargo includes tens of thousands of tonnes of fertiliser.
Julien Jreissati, programme director at Greenpeace Mena, said the crisis was exacerbated by conflicting reports over the ship’s cargo.
“The main problem we are facing right now is the lack of definitive information on the contents and types of fertiliser and other types of cargo that may have been on the ship,” he said. “Lack of access to the ship to assess the situation at the shipwreck is hindering the movement towards setting a plan to curtail the ecological disaster.”
The most trusted reports say the Rubymar was carrying 41,000 tonnes of ammonium nitrate, he said. But the US military said 21,000 tonnes of ammonium phosphate sulphate was on board.
Mr Jreissati said the release of so much fertiliser into the Red Sea could acidify the water and cause an algae bloom, putting the sea’s ecosystem at risk.
“Nitrate is also toxic and harmful to several marine species,” he added.
UN envoy to Yemen Hans Grundberg said on Sunday that experts planned to inspect the Rubymar and assess the environmental threat it poses.
Mr Jreissati warned that the Houthi attacks could also do long-term damage to the livelihoods of Yemenis, as “fishing is regarded as the Yemeni economy’s third sector in order of importance”.
Yemen’s economy has struggled since the civil war began in 2014. But fishermen in Houthi-held Hodeidah say they have been hit hardest since December, when the US launched an international task force to protect shipping in the Red Sea and Gulf of Aden from the rebels’ attacks.
The sinking of a UK-owned bulk carrier after a Houthi rebel missile attack off the coast of Yemen threatens to further delay the global shipping industry’s recovery and heightens the security risks at Bab Al Mandeb strait.
The Rubymar, which was carrying fertiliser, was sailing to Bulgaria when it was struck by Houthi rebels, who have been attacking commercial vessels in the Red Sea since November in a campaign aimed at disrupting global trade to put pressure on Israel to withdraw from Gaza.
The incident, which marks the first vessel lost since attacks on Red Sea ships, will force shipping companies to continue relying on the expensive and lengthy re-route around the southern tip of Africa, analysts said.
“This incident will do nothing to ease the concerns of ocean freight carriers, so it is likely the diversions around the Cape of Good Hope in Africa will be in place for the foreseeable future,” Peter Sand, chief analyst of freight platform Xeneta, told The National.
“This incident demonstrates the ongoing danger for vessels transiting the Red Sea and Gulf of Aden and why the majority of freight container ships are continuing to avoid the region.”
The detour, around the Cape of Good Hope, has raised freight shipping prices amid transport delays that could lead to higher consumer prices.
Freight data by Xeneta shows rates are significantly higher compared to before the Red Sea attacks. Rates rose 164 per cent on March 3 to $4,954 for a 40-foot container, compared to $1,873 on December 14 for routes from the Far East to the Mediterranean. A similar increase was reported on routes from the Far East to Europe.
“This incident further delays any near-term relief to cargoes taking an alternate route,” Junaid Ansari, head of investment strategy and research at Kamco Invest, told The National.
“This could impact global inflation as the bulk of the shipping carriers would avoid taking this shorter route resulting in higher costs, higher demand for crude oil in the shipping sector, as well as higher risk premium on crude oil and energy prices.”
Several shipping firms have suspended operations in the Red Sea following attacks on commercial shipping ships.
Iran-backed Houthi rebels in Yemen have continued to attack ships despite the US and western allies attempting to deter the group with air strikes.
About 12 per cent of seaborne oil trade and 8 per cent of liquefied natural gas passes through Bab Al Mandeb strait.
With the sinking of the Rubymar, container ships will continue to find alternative routes, according to an analyst at a maritime consultancy firm.
“The incident re-emphasises that the Red Sea crisis is not improving and our view is that the vast majority of container ships will continue to avoid the area for the foreseeable future,” said Simon Heaney, senior manager of container research at Drewry.
Last week, global trade ministers and delegates raised concerns about the effect on international commerce from the shipping attacks in the Red Sea at the 13th World Trade Organisation Ministerial Conference in Abu Dhabi.
The Minister of Economy Abdulla bin Touq said the attacks in the Red Sea have highlighted the need for further trade routes as well as investments to redesign logistics and ensure stable supply chains.
Global trade is expected to miss its growth forecast for this year, as risks continue amid rising tensions in the region.
On October 5, the WTO forecast a 3.3 per cent growth in global trade for 2024, but the projection was made before the Israel-Gaza war began.
Several members of the Opec+ group of oil producers, including Saudi Arabia, the UAE and Kuwait, will extend oil output cuts as part of efforts to support market balance and stability.
In total, Opec+ members are extending additional voluntary cuts of 2.2 million barrels per day to the end of second quarter, the Opec secretariat said.
The caps on production are calculated from the 2024 required production level, set out in the Opec ministerial meeting in June last year.
The move is in addition to the cuts announced in April last year, which have been extended until the end of 2024.
“Afterwards, in order to support market stability, these voluntary cuts will be returned gradually, subject to market conditions,” the oil producers’ group said.
Saudi Arabia, the world’s biggest oil exporter and Opec’s largest producer, will extend its voluntary cut of one million bpd to the end of the second quarter of 2024.
The production cap is in addition to the voluntary cut of 500,000 bpd announced by the kingdom in April 2023, which will remain in effect until the end of 2024, the Saudi Press Agency reported on Sunday.
The kingdom’s production will be about nine million bpd until the end of June 2024.
Meanwhile, the UAE will extend its additional voluntary cut of 163,000 bpd for the second quarter of 2024. The country’s production will remain at 2.912 million bpd until the end of June 2024, state news agency Wam reported.
The reduction is in addition to the voluntary cut of 144,000 bpd announced by the UAE in April 2023, which extends until the end of December this year.
Other Opec+ members reducing the crude output include Iraq (220,000 bpd), Kuwait (135,000 bpd), Kazakhstan (82,000 bpd), Algeria (51,000 bpd) and Oman (42,000 bpd).
Russia will cut 471,000 bpd during the second quarter both in terms oil production caps as well as crude exports. This will be along with its voluntary cut of 500,000 bpd announced in April 2023, which extends until the end of December.
The export cut will be made from the average export levels of May and June 2023, Opec said.
Brent, the global benchmark for two thirds of the world’s oil, was trading 0.08 per cent higher at $83.62 a barrel at 8.55am UAE time on Monday. West
Texas Intermediate, the gauge that tracks US crude, was down 0.06 per cent at $79.92 a barrel.
“An extension of the Opec+ cuts was our baseline scenario for oil market balances this year as returning a significant volume of barrels back to the market for the second quarter would likely have overwhelmed demand even more and led to substantial inventory builds,” said Edward Bell, head of market economics at Emirates NBD.
The common view in the market was that the group would partially extend the cuts into
this year’s second quarter in some form, said Jorge Leon, senior vice president at Rystad Energy. However, the latest announcement goes above market expectations, he said.
“Our assumption was that there would be a prompt unwinding of the voluntary cuts in the second quarter so that Opec+ crude production would rapidly increase above 36 million bpd by May.”
The updated profile shows Opec+ crude production at 34.6 million bpd for the whole of the second quarter before increasing to about 36.3 million bpd in the second half of the year.
The move “clearly shows strong unity within the group, something that was put into question after the November ministerial meeting, which saw Angola leaving Opec”, he said.
“It also shows robust determination to defend a price floor above $80 per barrel in the second
quarter. Our market assessment showed that if Opec+ rapidly unwound the voluntary cuts downside price pressure would have accentuated, taking prices down to $77 per barrel in May.”
Crude prices have been volatile this year, largely due to supply concerns caused by attacks on oil vessels in the Red Sea.
Meanwhile, persistent high inflation in major economies has added to uncertainty about the crude demand outlook, which has capped oil price gains.
Opec expects global oil demand growth at 2.25 million bpd this year, supported by improving Chinese economy.
The latest Opec+ announcement “tightens the oil market and adds upside price pressure”, Mr Leon said.
“The resulting upside price in the second quarter will not have a significant impact on demand prospects and will not derail the fight against inflation in Western
economies,” he added. “At the same time, the impact on US shale production should be marginal.”
Looking into the second half of this year, Rystad said it expected a strong demand rebound in the market, which implied that no further extension of the voluntary cuts were needed to support prices.
If the voluntary cuts are fully unwound at the end of June, the consultancy anticipates a market deficit of about 440,000 bpd in the second half of the year.
The increase in geopolitical risk in the market could also be playing a role in the latest decision by Opec+, Mr Leon said.
“Extending voluntary cuts instead of unwinding the cuts provides Saudi Arabia, the UAE and Kuwait with more spare capacity that could be needed if the conflict escalates further, and the market sees actual supply disruptions,” he said.
Other Opec+ members reducing the crude output are Iraq, Kuwait, Kazakhstan, Algeria and Oman