Red Sea shipping crisis sends shock waves through Asian fuel markets: ‘things are getting worse, not better’

The cost of shipping fuel from South Korea to Singapore jumped almost 50 per cent over the last week, according to a maritime market data company

Given the surge in freight costs, fuel producers are slashing cargo prices to keep supplies affordable amid tepid interest for gas oil and jet fuel

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Workers look on as containers are unloaded at the Red Sea port of Hodeidah in Yemen. The Red Sea shipping crisis is sending waves through Asia’s fuel markets, hoisting costs even on routes that don’t use the waterway. Photo: Reuters

Published: 9:00am, 30 Jan 2024

The Red Sea shipping crisis is sending waves through Asia’s fuel markets, hoisting costs even on routes that don’t use the waterway, while spurring sellers to reduce cargo premiums to offset the higher freight.

Rates for shipping products such as petrol have jumped as some vessels sail longer distances to avoid the Red Sea after attacks by Iran-backed Houthi rebels. That’s tightened the market, first boosting costs of long-distance routes via the Middle East, and now spilling into voyages within Asia.

Global commodity markets – especially for crude oil and related products – are transfixed by the stand-off, which worsened in recent days after a fuel-laden tanker operated on behalf of trading giant Trafigura Group was set ablaze by a Houthi missile.

The rebel group has been attacking merchant ships in support of Hamas against Israel, prompting retaliatory strikes led by the US.

“The most recent attack on a laden tanker suggests things are getting worse, and not better,” said Anoop Singh, global head of shipping research at Oil Brokerage Ltd. The diversions have added 3 per cent to demand for clean tankers, which carry refined products, and about 1 per cent to dirty-tanker demand, he said.

The cost of shipping 35,000 tonnes of fuel from South Korea to Singapore jumped almost 50 per cent over the last week to more than US$49,000 a day, the highest since 2022, according to Baltic Exchange data.

Meanwhile, the cost of larger tankers connecting the Middle East to Japan has hit the highest since 2020.