Egypt’s Suez Canal, used to carry about 8 percent of global seaborne trade, remained open today after week-long protests against President Hosni Mubarak, with shipping lines saying they had no plans to divert vessels.
Ships are still passing through without delays on the 120- mile waterway, which connects the Mediterranean and Red Seas, said Ahmed El Manakhly of the Suez Canal Authority. Some workers are leaving work early to comply with a curfew that runs from 3 p.m. to 8 a.m., he said.
“A closure of the canal is unlikely at the moment, but it could be that we would see delays due to people working there having problems,” said Jens Martin Jensen, chief executive officer of the management unit of Frontline Ltd., the world’s largest operator of supertankers. The company isn’t aware of any plans to divert ships, he said by phone from Singapore.
The waterway is the fastest crossing from the Atlantic Ocean to the Indian Ocean, according to the Suez Canal Authority. Should it close, tankers would have to sail around southern Africa. That would add about 12 days to a journey from Saudi Arabia to Houston, Luis Mateus, an analyst at Riverlake Shipping SA in Geneva, estimated last week.
Shares of Frontline jumped 8.5 percent on Jan. 28 in Oslo trading, in part because of speculation that Suez Canal traffic may be disrupted, forcing vessels on longer voyages. That in turn generates more income for shipping lines. Benchmark supertanker rates jumped 6.4 percent to $6,787 the same day, according to the Baltic Exchange in London.
‘No Direct Threat’
The protests in Egypt haven’t pushed up shippers’ insurance costs, Neil Roberts, senior executive-underwriting at Lloyd’s Market Association, which provides technical support to underwriters at Lloyd’s of London, the world’s oldest insurance market.
“There is no direct threat to ships we are seeing,” Roberts said by phone from London today. “So there would not be a reason for us to do anything about listing Egypt, which would give underwriters the ability to change terms and conditions.”
Underwriters calculate policyholders’ risks and decide whether insurance will be provided and if so under what terms, according to the U.S. Bureau of Labor Statistics.
A vessel going from Saudi Arabia to Rotterdam can cut the distance traveled by about 42 percent by using the canal rather than sailing around the Cape of Good Hope, data on the canal authority’s website show. To southern France the saving is 57 percent and to New York 30 percent, the data show.
Maersk Line, the world’s biggest container shipping line and a unit of A.P. Moeller-Maersk A/S, isn’t diverting ships away from the canal, Michael Storgaard, a spokesman for the company, said by phone. The company has closed its APM Terminals operations in the country.
The canal has the capacity to handle 2.2 million barrels of oil a day while that of the adjacent Suez-Mediterranean Pipeline is 2.3 million barrels, according to Goldman Sachs Group Inc. Actual volumes in 2009 were a combined 2.1 million barrels because of cuts in production by the Organization of Petroleum Exporting Countries, the bank said.
“Even if Western companies become a major target for the protesters, we believe that shipping traffic through the canal is unlikely to be seriously imperiled, though some individual ships docked in port might be at risk of attack if the situation deteriorates further,” Helima L. Croft and Amrita Sen from Barclays Capital wrote in a report today.
The canal was previously closed for four months in 1956-57 and for eight years from 1967, Barclays said. The closure of the canal this time would remove about 2 million to 3 million barrels of oil and about 2 million barrels of refined products a day, the bank estimates. Much of the northbound oil goes to refineries in the Mediterranean.
A closed canal would probably mean more African oil going to Europe rather than Asia and the oil previously bound for a northbound shipment through the Suez Canal or pipeline going to Asia instead, Barclays said.
“In a market where the epicenter of demand growth has moved to Asia and West African and Middle Eastern crude production is increasingly meeting that demand, the impact of the closure of the canal this time around would likely be far more limited than in the 1950s and 1960s,” the bank said.
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