Maritime trade accounts for around 80% of global trade and, weeks ago, two of its key routes were no longer reliable for traders. Whether due to rebel group attacks on commercial vessels, as in the case of the Red Sea, or adverse weather conditions, such as the drought affecting the Panama Canal, the global impact has been immense. And it becomes even bigger for oil and gas markets, which have the Red Sea as their main route.
Both the Red Sea and the Panama Canal account for about 20% of maritime trade. In the first case, the main goods that travel through the region are oil and gas, dry bulk cargo and container transport. In relation to fuels, more than a third of the vessels that use the region are oil tankers.
Traffic declines in the region were 30% for the Panama Canal and 10% for the Red Sea in January, and meanwhile the World Container Index (WCI) is up 195% from lows before the Panama outages.
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Impact on commodities
Considered the most sensitive among commodities, thanks to its vulnerability in relation to geopolitical events, oil has faced an impact considered moderate, according to Bank of America (BofA). This scenario, however, could change quickly according to growing tensions in the Middle East. According to the analysis, hostilities pose a serious risk to commodity flows and a major disruption in supply could raise prices quickly.
“The recent trade disruptions could have a similar (although smaller magnitude) effect to the supply chain crisis that unfolded in 2021 and 2022 – driving up freight rates, delivery times and energy prices, ultimately leading to instance, to an increase in global inflation. By sector, the oil and gas markets are the most directly exposed, but other commodity and export markets may also be affected”, considers BofA.
Another issue raised is that, due to longer delivery times, it is possible that there will be an increase in consumption patterns to avoid stock deficits. The foreign bank reinforces its oil price forecast at an average of US$90 for Brent in 2024, based on a more balanced market.
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With weakening fundamental changes and an increasing slowdown in the US economy, long-term annual averages have been revised to US$80.00 for Brent and US$75 for WTI, compared to previous forecasts of US$ 90 and US$86, respectively.
As the main points of influence for the commodity, Goldman Sachs highlights the disturbances in the Red Sea and the considered “structural regional mismatch between the sources of growth in supply and demand, as well as the growth in refining capacity”. In a report, the bank highlights that the reduction in flows in the two fleets has already reinforced the shortage present in the oil tanker markets.
In relation to steel, BofA’s analysis considers that, as Asia represents around 52% of steel imported by the European Union, longer delivery times and higher freight costs could maintain global prices. Still, if shipping becomes too expensive for Europe, it is possible that there will be an impact on the market, with the product being redirected to Latin America.
There is no expectation that the paper and cellulose scenario will be impacted, especially considering weaker Chinese demand. On the other hand, the redirection of paper exports to the Latin American market could put pressure on local prices.