Over time, more tankers may choose the longer route. “There will be a point at which the pain and the cost to go into the Red Sea and through the Suez Canal outweighs simple economics of going around the Cape,” Lois Zabrocky, chief executive of International Seaways, which owns and operates oil and chemical tankers, said at an investor event last week. “And this is a constantly evolving situation.”
Still, energy prices have been subdued, reflecting weakened demand and rising production in the United States and elsewhere, with Brent crude below its level on Oct. 7, the day Hamas attacked Israel. Even as tanker freight rates have risen by about 25 percent since the Red Sea disruptions began, according to Goldman Sachs, European natural gas prices have remained muted, probably because of large amounts of fuel in storage and alternative supplies from the United States.
CMA CGM, a Marseille-based company that is one of the world’s largest container shippers, is sending some vessels through the Suez Canal, at times escorted by the French navy. Analysts say the ships still moving through Suez tend to be older and smaller vessels that would involve lower losses if they were hit.
It’s unclear if escalating shipping costs will be reflected in consumer prices, especially in Europe, where economies are barely growing. Weak consumer demand means businesses will face pressure to absorb extra shipping costs in their profit margins “instead of passing price rises to the consumer,” said analysts at Morgan Stanley this week.
One factor easing the current crisis is a surfeit of ships and cargo containers. After the severe shipping log jams of 2022, logistics companies ordered large numbers of ships and containers that are now helping to ease a global crunch in the movement of goods.