4 Of The Largest Global Shipping Lines Have Decided To Avoid The Suez Canal Route: GE Shipping

On CNBC-TV18 | 4 of the largest global shipping lines have decided to avoid the Suez Canal route, says G Shivakumar, ED & CFO of GE Shipping. He tells Prashant Nair, Sonia Shenoy and Nigel D’Souza that they expect shipping freight rates to rise.

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Read More:https://www.cnbctv18.com/business/suez-canal-crisis-impact-shipping-ge-shipping-container-rates-tanker-oil-prices-18597831.htm

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Okay welcome back uh now a growing number of cargo ships have come under attack in the Red Sea authorities are monitoring tensions in the Red Sea shipping and shipping firms are now avoiding the sews Canal now the SE Canal is uh you know the one of the two very

Important sort of pass through uh canals for shipping rots from Asia to North America and other global Shipping rots the other of course is Panama which is already actually facing disruptions now Suz is the more important one out of the two out of between Panama and Suz and

This could have and this could aggravate uh sort of a sort of shipping rates uh and B it could also lead to Fresh supply chain disruption I mean if you remember back in 2021 you had this massive surge in container rates uh let’s have an let’s

Talk to an expert about this G shivkumar is ex executive director and Chief Financial Officer at G shipping he’s joining us on the phone line to uh tell us what this would mean uh so good morning good to have you with us here Prashant this side tell us how serious

Is the situation and uh you know shipping liners are saying including some of the largest in the world that they will now redirect traffic through the Cape of Good Hope which is a lot longer what does this mean for sort of you know rates out there and uh supply chain disruptions eventually

Good morning Prashant uh the situation in the Babel mandb and the Red Sea is evolving rapidly every day uh and yes uh I think four of the largest Shipping Lines have said that they will avoid the Red Sea and now use the Cape of Good

Hope route which of course adds a lot of days to the uh to the Voyages which is again going to have a couple of effects one is of course to to make it take more time to reach uh let’s say a Chinese export or a uh of of finished goods or

Uh Middle Eastern exports of oil which we haven’t come to yet but for the containers uh it’ll uh it’ll take more time to reach obviously it makes the market tighter uh which makes it again rates will uh probably go up because the market becomes tighter you need more

Ships for the same amount of work but it’s rapidly evolving and you know anything could happen it could settle down or it could get worse how will it uh I mean you know there are US forces which are already there present right monitoring these routs and this has just

Happened these shipping liners are saying that we are stopping use of the these rules could I me will this last it you’re saying it’s fast developing but what could change in your opinion I mean what will get these shipping lers to say that we are we will use these use this route

Once again yeah so there’s uh a convoying which the US uh forces have said that they will do uh so that was a flash news of yesterday last evening or last night uh which could give some comfort uh and again it depends on how effective that is because

It’s it’s difficult even with a convoy uh you know drone uh in uh drone attacks uh so uh we’ll have to see how practical it is it’s of course going to lead to delays and we’ve seen this convoying happen in the times when piracy was rampant uh it does lead to delays okay

Mr shivkumar Sure good morning we understand the situation at hand but what does this mean for tanker rates earlier you had when you spoke to us you said that crude tanker rates has shot up to almost 50 to $55,000 per day where is it currently and do you see it moving up further

So markets haven’t reacted yet markets are still pretty good CR tanker markets have been strong what this does is so about 10 12% of the world crude trade flows through this area through the Babel mandb the Red Sea and the sus Canal now if you have to reroot that via

The Cape of Good Hope that means depending on the voids that you’re doing between 20 and 60% extra time now if you just apply say an average of 40% on 10% of the trade that’s 4% extra demand for ships or reduce Supply the market is already really tight and a 4% further

Change in demand Supply uh balance could make it uh much tighter and therefore increase rates quite a bit so how much yeah I’m just trying to understand like what what is it currently at the rates uh as of today and when you say increase rates quite a bit what is the

Indication um so one is rates are have not reacted to this yet so you have uh product tankers earning you know around 30,000 $35,000 a day you have crude tankers earning between 40 and $60,000 a day not yet reacted to this situation there’s been not much change in the last

Uh 3 4 days as the situation evolved once you know you get and it’s very tough in a tight Market to see what you know suddenly if you have a further disruption it’s really tough to call what can happen because then it just takes off right then you just have to pay whatever

It takes to get the ship if the market gets that tight okay all right Mr shumar very quickly before we let you go the smaller part of your business is the offshore revenues as the rigs business out there as well you know it’s obviously for a

Longer term you know the lock in rates but in the quarters to come there could be a bump up in terms of revenues I just looking at it it’s just 20% of your business but it’s contributing to 250 to 260 crores do you see this number go up

Drastically and I think majority of it will flow down to the margins right as of now you’re doing mid te margins give us some color with the way ahead yeah the last bit is correct so whatever rate improvements come will mostly flow through to the uh at the

Abida level uh because costs are sort of inflexible we have a little bit of inflation but that’s a small part uh this will take some time to come through because as the rigs get repriced all the rigs are on threee contracts so as they get repriced this will come in we will

Get the full impact of repricing only in FY 27 Oh of all the current Ric because we have rigs two rigs coming off contract in FY 25 one rig coming off contract in fi 26 so for getting a full year of new earnings will take two to three years

Gradually so gradually on a quarterly basis from 250 crores we likely to see this trend up right in the next few quarters has a couple of rigs get past the bottom of the market yeah that’s the bottom bottom line yeah um just a few more questions Mr shumar for if the if

This issue becomes so for example I was looking the the Shanghai containerized Freight index uh it’s up some it’s up some 10% since the end of November right uh If This Were to escalate and becomes the rates shoot up how will this impact you know your uh uh inventory out there

In the market how much is how much of how much of these are on day rates and how much is it locked in your Fleet no so we don’t have container ships so not container I’m saying that I was just giving an example happen containership Mar yeah

Not containership I was just giving an example that if rat start to for product or oil tankers Etc yeah so okay most of our Fleet is open to the uh to the spot Market uh so we have 24 tankers of which four are on fixed rate

Contracts and the rest are open to the spot Market okay so we will get the impact yeah okay and and one more question the large impact as you see it for container traffic this this uh passage is much more important right I mean I think the Su is about 34% of the

Container traffic uh but for product Etc it’s under 10% it’s about 10% plusus 2% yes so the larger Delta the larger impact perhaps should show up in container uh that’ be the correct way to look at it that’s correct that’s correct but the container Market the starting

Point is not as tight as a tanker Market the container Market is weak so uh you know it’ll take some time for it to get to full strength it takes a lot of impact but yes the impact of this incident is much more on the container Market okay but the product Market is

Already tighter so it’ll uh it’s already crw tanker and product tanker rates are already markets are already got it Mr Shar thank you very much for joining us this morning and explaining uh the implications of this important story we’ll keep coming back to you as this

Story develops as you said every day is a new day and this is fast changing scenario out there Sonia absolutely all right we keep an eye out on G shipping But