Transcript
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The host introduces the episode, previews the five maritime stories, and sets up the main topics to be covered. He also briefly welcomes viewers and asks them to subscribe.
Speaker A
On this, the 99th episode of what the Ship.We look at the top five maritime stories as of February 11, 2024.I'm your host, Sal Mercogliano.Welcome to today's episode.We got five big stories to cover.We've been meaning to get back and do a what the ship.But there's been so much going on, absolutely crazy.So we're going to jump around the planet today hitting five key stories.Number one, we're going to start off in the Black Sea talking about Russia, Ukraine story we kind of fell between the cracks, but still a major story when it comes to global shipping.Then of course we're hit the Red Sea, talk about the Houthi.We're going to jump over to the Panama Canal and the low water issues there.We'll look at the container sector and then we wrap up with one of the best stories possible.
Insurance.That's right, insurance.You will love the story.But if you're new to the channel, hey, take a moment, subscribe to the channel and hit the bell.So be alert about new videos as they come out.All right.We have been following what's been going on in and around the Black Sea since this channel started back in March of 2021.That's right.We're coming up on our three year anniversary next year, next month.
This section covers Ukraine's grain exports through Odessa, the risks of escalation in the Black Sea, and Russia's claims about attacks on civilian cargo ships. It also explains new sanctions on Russian oil, tanker fleet disruptions, and the impact on LNG shipping and U.S. crude exports.
Speaker A
So obviously gonna be a lot going on regarding that.But a few stories came to light and I want to share them with you because little concerned about what I'm reading and some implications here.So number one, this story over at G Cabins, a Bloomberg story.Ukraine farm exports From Odessa seaports 14.3 million tons since August.That's major.Understand back in August one of the issues we had was the fallout of the Black Sea grain initiative after Russia invaded Ukraine back In February of 2022, we saw really the curtailment of exports by sea of grain.Ukraine eventually started exporting grain through the Danube ports right there on the border with Romania.Particularly after they neutralized and got back Snake Island.They sank the Russian cruiser Moskva and pushed the Black Sea fleet back to Sevastopol.
But the Black Sea grain initiative was a temporary measure brokered by Turkey and the UN between Ukraine and Russia.But that fell apart.And what Ukraine has opened up is a new maritime corridor, a corridor that they're defending, they're protecting and they have ships coming up into them.And matter of fact, there are more ships using the grain corridor today than we're using the Black Sea grain initiative.So Ukraine is poised to return back to pre war export levels in the exporting of of grain, which is absolutely essential for Ukraine.They need this money to go on.However, we see this story begin to arise and this is the fear that I'm beginning to see emerge.Russia says it foiled a Ukrainian drone attack on civilian cargo ships in the Black Sea.Now this is back on Sunday and the Russians use that phrase, civilian transport ships on Friday evening.
Now, Ukraine has targeted quite a few ships.Matter of fact, if you look at this chart provided at Captain Loma, this is one of those online websites Twitter has really good site, really recommend you follow it.He's been tracking this.He documents all the ships that have been sunk and or attacked or damaged.The focus has been on Russian naval vessels or Russian auxiliary vessels, quite a few of them.What Ukraine has avoided doing is attacking commercial ships.Now they have hit vessels, tankers and cargo ships, but those are used for Russian military support either in and around this region or down in the Mediterranean in Syria.But now Russia is alleging an attack on commercial vessels.And the fear I have is that Russia will use that as a cause to attack some of these grain ships going in and out of Ukraine.That would mark a huge escalation in the conflict.
If all of a sudden Russia starts targeting commercial vessels and you have to think if you're Russia, based on what the Houthi are doing in the Red Sea, there's going to be very little response about that.We've seen little response from NATO and other nations in and around the Black Sea.Obviously there's issues regarding the Montreux Convention where the Turks control the straits, the Bosphorus and the Dardanelles to enter in and out of the Black Sea.But there are three NATO nations that are on the Black Sea.Bulgaria, Romania and of course, Turkey going on here.There have been renewed sanctions being leveled against the Russians, particularly over their tanker fleet.
And a whole series of stories came out this week regarding that.Mike Shiller US Issues new Sanctions over Russian Oil Price Cap Violation.Remember back In December of 2022, the EU, the G7, Australia and a few other countries issued a price cap on the export of Russian oil.Those countries wanted the best of all worlds.They didn't want to curtail Russian oil shipments for fear that it will cause an oil shortage around the planet.
At the same time, they wanted to hurt Russia economically.So what did they do?They price capped it.They said you could not move Russian oil if it was over $60 a barrel.And the mechanism they used was insurance.Yeah, we're going to come back to that, at of the stories here today, they use insurance to curtail that.And what the US has been doing through their Department of Treasury, through the Office of Foreign Asset Controls is targeting companies and industries and sectors that are using Russian oil above the price cap.So they're going after violators of that.And what we're seeing is it's, it's having an impact.Greek ship owners, for example, are stampeding out of the Russian oil trade.
According to this story from Bloomberg.We're seeing the number of Greek owned tankers hauling Russian oil falling and that's down quite a bit.It's down to just 8 in January.It was as high as 40 back in May.So definitely a big exit of the Greek ship owners out of that area.
Same time we're seeing Russian oil tanker, one that was just sailing out of the Baltic turnaround, the NS leader that had been hit by US sanctions actually turn around and head back toward Russia.So we're definitely seeing the impact happen, but we're also seeing it in other areas too.Hanwha Ocean transfers gas carrier for Russian Arctic LNG to to UAE entity so one of the things the Russians are trying to do is get around this elements of sanctions.And one of the things that's been happening quite a bit is Russia has established a series of shipping firms offshore of Russia and particularly in the uae.And here we're seeing that story where an LNG carrier was basically transferred to a company through the uae.It's getting it out of Russian control, getting it out of Russian hands, even though that company probably has its connections all the way back to Moscow.
But this is something Russia has been doing.We've seen more and more of these companies pop up.Russia has been trying to get insurance through these kind of fly by night entities that have just popped up in the uae, in Singapore and throughout south and East Asia, trying to bypass the main insurance companies to get this so that they can haul Russian oil, Russian diesel when it goes over the price cap.See this story from Bloomberg.Also US sanctions halt delivery of new vessels for that Russian Arctic LNG2 fields.So a series of vessels being built in Korea are now being held up.They're not being delivered.These are ice strengthened LNG liquefied natural gas carriers.Remember, liquefied natural gas is absolutely essential and you can still import LNG into the European under the sanctions from Russia, but now these ships are not going to be delivered.
Russia needs ice strengthened LNGs to operate in and around the Arctic.You can't use Just regular liquefied natural gas carriers.So this is a big hit to Russia if those ships are not going to be delivered.At the same time, we're having an impact in the United States because of the displacement of moving ships around due to Russia exporting oil.Because of issues in and around the Red Sea, issues in the Panama Canal, what we're seeing here is much higher tanker rates are impacting even the United States ability to export crude oil.
U.S. crude oil exports tumbled 1 million barrels per day in January, lowest in two years.That's because of the high freight rate to deliver oil from the United States overseas.What we're seeing is really a reallocation of where oil is being delivered.So the Black Sea, once again in the forefront, really have to keep an eye out on what Russia does regarding these Ukrainian grain exports.A lot of ships moving in and out of that area.
These vessels tend to be a little bit lower value.We're still seeing a high war risk insurance to get in there, about 1.25% now.That's down from a peak of about 3%, depending on when you looked at the time period.So vessels are paying to go up to Ukraine to load and come out.But if Russia decides to start hitting those grain loading facilities, start hitting those ships coming in, that creates a whole new spectrum of the conflict.
Because if Russia starts targeting Ukrainian ships, then the Ukrainians may start targeting Russian ships.And that's when the Black Sea turns into the Persian gulf of the 1980s.Not a great prospect going forward.
The discussion shifts to Houthi attacks in the Red Sea and the growing reluctance of major carriers to transit the region. It reviews falling Suez and Bab el-Mandeb traffic, revised security guidance, grain diversions, oil routing changes, and the planned EU naval mission.
Speaker A
All right, let's go ahead and jump to our next story.Our next story takes us down to the Red Sea and the attacks on commercial shipping by the Houthi.
Over on G. Captain Bloomberg story.Shipping bosses warn maritime security in the Red Sea is getting worse, not better.And what's really interesting is that the head of Maersk, Vincent Clark over in Copenhagen, actually did an interview with the U.S. naval Institute and their new service.We don't usually see the military interviewing commercial shipping firms, but in this case we did.Heather Magilio went over there and the Maersko said military operations can't guarantee safety of ships in the Red Sea.We've seen Maersk, and not just Maersk, but Maersk Lines Limited, their American affiliate, pull out.And now we just had a story with cma, cgm, the French firm that had been getting French escort vessels to take them through.They have pulled out.And this means that we're seeing a bigger reduction in the number of ships heading through the region.If we head over To IMF Port Watch, which monitors this number.
We can actually see graphically what we're talking about here.So here's the chart for the Suez Canal.You can see when back in about mid December, we start seeing that divergence right there.We were seeing on average about 70 vessels going through.And if we fast forward here to the data for the 6th of February, the average last year was 68 vessels.But right now we are looking at 38 vessels coming through.So a substantial drop.And if you look at the volume of trade, we're looking at cargo going through.And again, this is the Suez Canal.We're looking at same thing.You see that divergence.We were looking at almost 4.9 million tons of cargo going through.Jump down here to the very end.We're looking at four point nearly seven traditionally going through at this time of the year, down to 2.1.Head here specifically to the Bob El Mandab.
We see the transit calls again, really significant.77 vessels back last year at this time, down to just 35 vessels.And when you start looking at the volume again, a precipitous drop, very significant.5.3 million tons versus what we're seeing right now, 1.7 million tons.This is impacting the ports on the west coast of Saudi Arabia.
Jeddah, it is impacting cargo going up to a lot.The southern port of Israel, it's impacting Jordan, getting up to Aqaba, to Sudan, it's having a huge massive impact.And one of the biggest ones is Egypt.Egypt is seeing a substantial decrease in not just the ship transits going through.They normally make about $10 billion a year going through.They're on track right now to maybe make 4 billion based on that.But there's a lot of other assets that go in.There's port handling, there's container movement.There's a whole other series of money that they're looking to lose right now.So this diversion is having a massive impact in and around the region.
We see that the shipping industry has just issued some revised guidance for navigating through the southern Red Sea.These are the major shipping firms and major advocacy groups.Bimco, the Cruise Line International association, the International Chamber of Shipping.I just want to show you one section that they gave here.This is on the voyage planning consideration.
Ship operators which have called or planned to call at Israeli port should limit information access.Published information could be used by the Houthis.Ship owners and operators who have recently acquired a vessel from an Israeli.Associated companies should ensure vessel systems AIs properly Reflect updated information.We know that there have been attacks against vessels because the AIs information had not been updated or on some of the tracking sites as explained in BMP5.This is the previous notice they gave.Ships planning a voyage through the region should conduct a thorough ship and some voyage specific threat and risk assessment considering any additional advice from their flag state.These assessments should include input from official sources including the UK Maritime Trade Office and relevant information as ship operations.You should also be looking at trading history of the ship over the last three years.We know the Houthi are looking back and trying to make connections on the ships.
Lastly, ships with AIs powered on as well as off have been attacked.Turning off AIs makes it marginally more difficult to track a ship, but may also hinder the ability of the military to provide support as directed in IMO.Circular A.1106 goes on.If a master believes that the continual operation of AAS may compromise the safety and security of his her ship or where security incidents are imminent, the AIs may be switched off.Okay, we have seen mixed results of that.Even in the case of US flagships.I've witnessed US flag ships that left their AIs on while they cut holes in the ocean for days while others enter the region and almost immediately turn them off.There does not seem to be any clear information being given by the security agencies in and around the area.Just talked the other day about the issue of testimony before Congress and the issue of secure communications.
Well, AIs is another method that needs to be discussed this story.More grain ships diverted from Red Sea due to Houthi attacks.So we had not seen grain ships really being impacted.Grain ships tend to be lower cost because of the bulk nature of the cargo, the low value.The insurance was not as cost, you know, as expensive.However, error.Now we're seeing grain ships begin to be diverted and this is going to have an impact.There's a lot of grain that goes through this region to the port of Djibouti, to the east coast of Africa, to southern Asia.And now it's going to have to take a longer voyage and that involves longer voyages of grain.Could result in spoilage and damage to part of the cargo.
Red Sea chaos causing global oil buyers to shop locally.I mentioned this in that previous story with Russia that what we're seeing is really a real allocation of oil ships and tankers on these key trade routes.Instead of traveling really long distances ton miles, some consumers are shifting where they get their oil from.Now that's not going to be always Possible, but we're definitely seeing that impact taking place.This is why I think you're seeing that decline in U.S. oil exports because of the additional ton miles associated in moving that oil from the west coast of the United States.
And then finally the EU is aiming for a mid February launch of their Red Sea naval mission.It's going to be interesting to watch if the US will downgrade its involvement.Remember, it's got a new, it's got a nuclear carrier strike group, the Eisenhower on scene.It's got at least three to four Arleigh Burke class destroyers that are supporting this mission.But we'll have vessels from the European Union arriving.
They don't have an aircraft carrier.Some of the vessels are nowhere near as capable as Burke class Aegis class destroyers.And so the question really will become what is this new mission going to look like?This handover from the United States to the EU or supporting the eu Supporting the US Mission is going to be a really important one to watch.All right, let's go ahead and jump over to our next story.
This chapter explains how low water levels are limiting Panama Canal transits and forcing cargo reductions on Neo-Panamax ships. It also covers the canal's freshwater system, El NiƱo forecasts, and the broader effects on routing and freight costs.
Speaker A
All right, our next story takes us to the Panama Canal and low water which has been impacting the Panama Canal for quite a while now.Going back through some stories and realized a few years ago we were talking about this issue back then and now it has manifested itself into fruition.This story From Reuters on February 7.The Panama Canal expects to maintain current transit levels through the dry season, which is really good news.Normally you see anywhere from 32 to 36 ships head through the Panama Canal on a daily basis.We're down to 24 right now.And understand one of the aspects of that 24 ships going through is that we've had to reduce the amount of cargo on the new Neo Panamax ships.These are the ships that use the new lane of the Panama Canal Open since 2016.They're having to offload part of their cargo.
Matter of fact, Maersk has got a program in place to bring their fully loaded Neopanamax ships into the Panama side of the canal, offload containers, rail them across and meet them at the other side.
That involves delays, that involves extra port handling, it involves extra cost.This is why we're seeing those freight rates to rise.Something we'll talk about here in a minute.Going on here.What we're seeing is perhaps some good news.Come in.End of El Nino could bring relief for Panama Canal water crisis.Forecasting is saying that we could start to see improvements with the end of El Nino between April and June.About a 79% chance for that followed up by a La Nina weather pattern between June and August with a 55% chance, which would mean more water.What does this mean directly for the Panama Canal, bud?
Because right now we are extremely low water.This is the Gatun Lake water levels.Now, let me take a second here.The Panama Canal operates on fresh water.It is not a saltwater lake.I know a lot of people want to talk about oceans rising and global warming has nothing to do with Panama Canal.To get through the Panama Canal, you have to get up onto Katun Lake, which means you have to go through a series of three locks on each side, get up onto the lake, sail across the lake and then go down.And the way the canal was designed back in 1914 when it first opened was they jammed up and created a large freshwater lake.And that lake spills into the locks.You use the water from the lake to fill up the locks, to raise vessels up.
And when ships go out, you dump that water into the ocean.You don't dump it back into the lake because it will have mixed with salt water.And you can't have salt brackish water in Katun Lake.You'll kill the wildlife, you'll kill fishing.And more importantly, this is a lake that provides the drinks drinking water for Panama.
And as of the last Panama Canal annual report, about 50% of the water usage of Gatun Lake goes to the Panama Canal.Half of it goes to the new lane of the canal.The other half goes to the old lane of the canal.Now, when they opened the locks in 2016, the new locks, they knew they were going to increase substantially the amount of water they're using.However, there were provisions.They built a series of containment ponds to catch the water and recycle it.It they'd hope to be able to recycle 80% of that water.They're only recycling about 50% of that water.There's no reclaiming of the water going into the old locks.And so water usage has increased exponentially.
There were plans to increase dams to get the water level on the lake higher.Unfortunately, Panama hasn't invested in that and that is costing them right now.If you look at this chart, right now water levels are at 81.1ft.But the plan here, or the expectations here, is that it's going to go down to lower than 70, not below 80ft, roughly around 78.7ft by April.Now, if you look at historically, we're at 81.1ft.
If you look at historically in March, which is usually the, excuse me, May, which is usually the lowest month, that's usually at 82.5ft.So we're below where the lake normally is.And this is the dry season.We're into February right now.We expect dry season to last through May.It's not until June that you start seeing water being put back into the lake.Now, what this means is we could potentially see some more changes in the canal.So, for example, one of the things that the canal is doing right now is allowing cruise ships to go into the canal.I had my brother go through the Panama Canal not too long ago, but he didn't go through the canal.He came in on the Atlantic side, went up on the lake, and then sailed around and then went back out.
That's a huge waste of water right there.But cruise ships pay a huge toll to go in.And so Panama is weighing the environmental with the economical.And right now they're favoring the economical.And this is a decision they're going to have to make whether or not to continue such voyages and, you know, adjust.
If we're seeing further reductions, if it starts decreasing even further, we may see the Panama Canal impose more restrictions and start changing it up.And obviously this has a worldwide impact.One of the things we're seeing right now is container ships that are coming from Asia using that lane of the Panama Canal, the Neopanamax lane, remember, big old lane, you can bring ships through that have 15,000 containers, Vice 4,500.Well, those ships are offloading on the east coast, on the Gulf coast, and then they're heading east, heading back to Asia by going around the world, but not through the Suez Canal.They have to go around Africa, which actually is just a few days longer on a longer voyage like that.
But still, it's taking time.It's taking time and it's changing routes.And as we'll see when we talk about containers, this is having an impact on container rates around the world.All right, let's go ahead and jump over to our next store story.
The focus turns to Maersk's profit warning, overcapacity in the container sector, and the wave of vessel scrapping expected in 2024. It then examines U.S. import trends and detailed freight rate movements across major trade lanes, showing how Red Sea disruptions are pushing rates higher before they begin to stabilize.
Speaker A
Our next story takes us to the container trade and once again, Maersk out in the forefront of the news, really trying to get out there in front of other firms.
This story in Bloomberg over at G. Captain Maersk shares hammered as the Red Sea boost masks over capacity.All right, so the head of Maersk, Vincent Clerk, had.They had their fourth quarter meeting online.And a couple of interesting developments came out from that, especially this.The shares fell as much as 15%, erasing all the gains since the start of mid December.
They declined 14% as of 1124.In Copenhagen, Hagen and even Hopagloid slid 13%.So we're seeing those container liners having this slide.And the reason is, well, why?Why is this happening?Well, Maersk warned about profit warning amid overcapacity and the Red Sea disruptions.Now I have to take a step back here for a second because Vincent Clerk, the CEO of Maersk, warned about the fact that profits don't look good.And you have to put that a little bit into context here.If we scroll down here.Maersk, viewed as a barometer of world trade, said it expected underlining earnings before interest, tax, depreciation and amortization ebitda of between 1 to 6 billion dollars.Let me be about this again.They're expecting profits of 1 to 6 billion dollars this year compared with 9.6 billion last year.Now analysts had an average forecast for them for this year of 6.6.
So Maersk is coming in lower.But let's be clear, they're making a profit, a profit of at least on the conservative side of a billion dollars.I could do my Dr.Evil for you, but I won't.I think Maersk may be crying a little wolf here at this.Now there's a reason that these shipping companies are doing this.This is the chart from Alpha Liner showing the major carriers and their basically profit margin by quarter.
You may notice something very interesting here that between basically 2011 and all the way up to 2019, that container liners were pretty flat.They would make a little bit of profit and have some loss.It was pretty much not a great period of time.A little bit of a peak back here in 2010, coming out of the 2008, 2009 debacle.But then all of a sudden in 2020, 2021 and 2022, man, the cash cow came in.
The supply chain crisis was a huge benefit for the ocean carriers.They pocketed billions of dollars and with those billions of dollars they've invested in new ships.This is the overcapacity that Clerk was talking about going to come back to in far in 2023, we're seeing a decline in the overall profitability of the shipping companies.And this is what he's talking about.However, they're still above, you know, the margin line.They're making money again.If they're making just a billion dollars, a billion dollar profit for a company, again, profit we're talking about above and beyond expenses is pretty good.And it looks like that Maersk is not as bad off maybe as they want to tell.So a couple of issues here.We're seeing a lot of container ships heading to the scrap heap.This is the estimate right here for 2024 of what we're looking at 375,000 TEUs worth of vessels will be heading to the scrap heap.
You go back and look, that's really the highest we've seen since 2017.This is the introduction of new vessels.We've got the new ultra large container vessels coming online, we've got the new Neopanamax ships coming online and then we've got the newer kind of mid size feeder ships coming online.But Understand because of IMO 2020 and IMO 2023, these new fuel constraints, a lot of these older ships are not going to be profitable to run.It's going to be really expensive to run.So we're going to see scrapping of vessels take off here.And the problem is we just don't know how that plays out.We almost, we saw almost no scrapping at all during the peak of the supply chain, which meant there are a lot of older vessels that are out there in the fleet.And now all these new vessels are adding in.
On the flip side of this, Mike Shuler's story over at gCaptain, US container imports expected to rise in the first half of 2024.This is based on data from the National Retail Federation and when you look at their chart for 2023 and 2024, you can see where 2023 was and where 2024 is.We're seeing basically tit for tat so far, but the perspective here is that they'll actually rise.And again the Latter Half of 2024 is when you start seeing all those goods start coming in for the holiday season.Now we're at a low point right now.We're seeing the dip right now.February will probably be one of the lowest months.And if you look at a follow on story that Mike did US container import volume surge amid the global supply chain challenges, he taps into a report from Descartes which tracks all this.
This blue dot right here represents January of 2024.Notice we are above the 2023, 2029, 2019 and 2020 levels.We're just below 2021, 2022 and if you're coming up here from 2023, we're jumping up from about 2.1 million containers coming in monthly to about 2.2.A little over that for January.Now everything goes down in February because of the Chinese New Year.There's about a week there In February where nothing comes out of Asia.And that's always a marked drop.
But the question is, do you get that big kickback in March as good start swinging in?Notice the only time you didn't have that was back in 2019 and 2020.But in those other years we had a big kickback.And if you look at 2023 last year year, it's pretty steady gradual growth right up until October when it typically falls off.That we see.
So going to be a big question about where the US winds up on this chart.Spot rates roller coaster for container shipping Now I will say there's some conflicting stories here.So Mike Whackett over Lodestar wrote this story on February 9th and then on February 5th he had written this story.Freight rates begin to settle as shippers adjust to Cape diversions.So we're really trying to see what happens, understand and most freight rates are long term freight rates.
Most of the big shipping companies and shippers work out those freight rates in advance.About 70% of that cargo goes that way.And then everybody else gets on the spot rates.Now for a lot of small shippers, a lot of people who don't ship large volumes and do it very frequently, they have to use the spot market rate.That's what they do.
And we just saw the new rates negotiated between Asia and Europe on January 1.The new ones from for Asia to America come in on May 1st.So that's being done.This is the Freightos terminal.Freightos reached out to me, offered me some access to this technology which I jumped upon.Thank you so much.It will definitely improve my ability to bring information to you.So this is their global freight index.Now this is not a shipping rate.This is kind of a composite index.
But one of the things you'll note here is you can see how high it was back in 2021, 2022 and then leveled off.And then coming in in to the end of 2023, you see that level is right around 1100, $1200.Then you can see the big jump and that is because of the disrupt disruption we're seeing on the Red Sea.Let's look at some rates here.So China, East Asia to the North American West Coast.
You can see how low it got.It was down to just under just about a thousand dollars in 2022, peaked back up again running right around 1500.But now we're back up again, sitting at about $5,000 from East Asia to the West Coast.If you look at the east coast even a bit higher right Here we saw it was running right around two, two and a half thousand dollars.Now it's right around $6,850.
Let's go ahead and look at some of these other rates through the Suez.So this is China East Asia to Northern Europe.Again, this would normally take us through the Gulf of Aden, the Bab El Mandab and the Red Sea.And you can see the massive spike here running right around a little under fifteen hundred dollars.And then it peaks up, actually capped out here right around $5,700 and now has come down a bit.So you see those stabilization, that's what we were talking about before.If you look at the China, East Asia to the Mediterranean, these, this cargo has to loop all the way around through the Straits of Gibraltar into the Mediterranean.And you saw a massive spike, about $1,500.Jumped up as high as almost $6,500 and now is down to about 61.And then if we look across the Atlantic, remember a lot of cargo heads across from Asia to Europe and then gets transloaded.
If you look at Northern Europe heading over to North America and the east coast, that rate has just begun to tick up a little bit.Again, there's a bit of a lag and delay of this hitting.So you're right around 11, $1200.Now it's up at around $1500.But remember, you got to pay for that front side, that Europe, I mean that Asia to Europe.Hall and let's look at South America because we don't ever get a chance to talk enough about South America.If you look at that Europe, the South America, seeing very much the same thing, seeing those spikes in those rates not nearly as high, it's starting to come down quite a bit.But then if you look at that Europe to the west coast of South America, that's really an interesting one.You're talking about at least seventeen hundred dollars.And when you get into this data, you begin to see not just the cost here, there, but also transit times, how transit times have begun to increase.
So really want to thank freightos for sharing that information with us.Think it's a, it's a great asset.If you haven't been over to the freightos site, I'll have the link in my show notes so you can go on over there.So obviously a lot going on with the container market.Definitely seeing the issues being raised by the shipping companies.
Again, not, not too surprising.They're, they're sounding the alarm.But at the same time what we're seeing is, is spikes up in freight rates across the board, starting to see them stabilize, which is really good.And it's not just freightos that's showing that data, Drury and a lot of the other sites, Zentia, all showing that kind of stabilization begin to take place.So that ballistic climb we saw in the freight rates is leveling out.Now, where it levels out, that's the question we have to see.But I think it is interesting to note that the US is seeing a spike in the amount of goods heading their way.All right, let's go ahead and head to our last story.
The final major segment explains why marine insurance is central to global shipping and how governments use it to pressure Russia and Iran. It also examines war risk premiums in the Red Sea, Chinese vessels' insurance advantages, and the possibility of a broader flight from certain flags.
Speaker A
Oh, sorry.Getting ready for our next story about insurance.And I nodded off.Actually, this is a really good story.I think you're going to enjoy it because this is the background of global shipping.You can't understand shipping without understanding insurance.Go back to Lloyd's Coffee House in London where ship owners would sit around and bet on whether or not their ship would arrive and you sit there going, well, Sal, why would you bet against your own ship?
Ship?Well, if your ship didn't arrive, at least you won the bet and had money to go invest in a new ship.That is insurance.That's exactly what insurance is.And it's been as old as shipping has been.
So let's delve into this story about global insurance.So here's the story over from Bloomberg over in GCAP G7 aiming to force Russian oil away from the shadow fleet.UK officials said so again, the US, the UK, G7, EU, Australia, all these major countries are trying to use insurance as a way to persuade the Russians to basically enact policy.It's a very innovative thing to do and understand insurance is absolutely essential to be able to move goods.If you don't have insurance on your ship, if you don't have insurance on your cargo, if you as a personal shipper don't have insurance, this can all be be problems.We saw this happen when Ever Given got stuck in the Suez, when Ever Forward ran aground off of Baltimore.This happens all the time.You have things like General Average.Again, if you do not ship things on a regular basis and understand the logistics and the intricacies of global shipping, you really need to get yourself an experienced freight forwarder.
You need to have a good maritime attorney because they can warn you of all these aspects.
But in this story, the G7 is really trying to curtail the ability of the Russian shadow fleet to operate because what they want to do is get Russian oil being transported on ships that are under the insurance clubs.These are the insurance companies that they have Some control over.What they don't want to do is push them out into these new clubs, these new organizations, which they have very little control over.Then going on here to our next store.US Insurers cover oil tankers suspected of violating Iran and Russian sanctions.So again, really funny story.You are the G7, you're the European Union, you're the United States and you're sitting there telling everybody, hey, we're imposing these sanctions against it.But then when you pull back the veil a little bit, you find out that one of these insurance companies, which is ironically named the American Club.
That's right, the smallest of the 2012 companies that cover the world's ocean going ships, that's based in New York City, has been accused and basically alleged to be providing insurance for up to 21 vessels suspected of having moved Iranian oil.This is being brought to light by the United against nuclear Iran, the UANI.
And so vessels like the sincere O2, which picked up oil at an Iranian port, it steamed across the Persian Gulf on its way to the uae, got tagged with that.And then lo and behold, the company that is providing it is the American Club that's doing it.So insurance is a really difficult topic for people who don't know it to look at, but it's absolutely essential.And one of the things that the nations are trying to do is use these sanctions again.They don't want to come out and blockade, they don't want to like sit there and say you can't sell.
So instead they're trying to use these economics tools to do it and it becomes very complicated.Now marine insurance is continuing to support the Red Sea and the Black Sea trade despite challenges.So the International Union of Marine Insurance confirmed that it's just meeting, it just had its annual winter meeting that they're going to continue to support ships in and around these regions, which is really important.One of the things that we don't talk about enough when we talk about, you know, like the world wars, is that countries had to provide war risk insurance to their shipping because companies would not sail their vessels unless they had that type of protection for it.If you look at the reports of the U.S. maritime Commission during World War II, there's a huge section on war risk insurance.There's an entire department that was leveled on this same thing over at the British Ministry of Trade.
Really essential.And the fact that war risk insurance is being provided to ships sailing the Red Sea and Black Sea means that you can continue sailing.If they were unable to get war risk insurance, nobody would be sailing in this region.But there is a bit of an issue about the war risk insurance.
So this Reuters story, US UK ship investors hit by soaring Red Sea insurance.We've talked about this.Us, British, Israeli firms are getting hit by as much as a 50% increase in ships transiting the Red Sea because the Houthi have now come out very clearly and said we are targeting those vessels.They have perpetrated a series of attacks against those vessels and in some cases have connected with those vessels vessels.Now we've seen this, the number of attacks decline, but they are still leveling strikes at this time.
And that means the war risk insurance is on the high side, maybe as high as 1% for the total value of that ship.And what happens is if you have 1% war risk insurance on a ship that's carrying $100 million, the ship and the cargo is worth $100 million.That is a million dollars.That is a million dollars to sail through that region.Add to it a half a million for Suez Canal voyage.
You're spending $1.5 million to just sail through that area.If you have to go around Africa, well, that may be a million dollars in fuel and additional charter rates and crew costs.And you're sitting there going, well, it's economical to go around that way.And plus, I'm assured I'm not going to be attacked.And so the companies and insurance companies are weighing these issues right now.
Now, and because of the level of Houthi attacks, a lot of ships have made that diversion.We looked at the chart from IMF Port Watch.What's interesting about this is that this article from Bloomberg Chinese ships get insurance edge navigating the Red Sea.If we look at this story and go down into the details here, while the overall picture is mixed, some Chinese linked vessels are having to pay as little as 0.35% of their hull and machinery value to obtain insurance for transport.It most ships are paying somewhere between 0.5 and 0.75, although that varies yet we've seen as high as 1%.
So again, take that $100 million vessel and you're paying 1% on that.That's a million dollars.If you're paying 0.35, you're paying $350,000.It is economical at that point to sail through the region.And so one of the interesting facets we're seeing here is that China and we have seen now Chinese naval vessels escorting Chinese ships.
We hadn't seen that for a while, but we started seeing that manifest itself.But we are seeing Chinese vessels, ships with Chinese crews, ship ships that identify themselves with China are sailing through this area now.Not the big container ships.Costco ran a few ships through the Red Sea, but then they stopped.And what we're seeing right now is that it seems to be more conducive, safer to identify yourself with China than it is to have the protection of the US and British and EU navies, which is a really interesting perspective.Will we see a quote, unquote, flight from the flag?Will nations and companies start identifying their ships with China flag in Hong Kong and maybe get Chinese crews?This could be a big win for China.China's trying to really control and get their hands on more shipping out there, there.And if they can do this because the Houthi are forcing ships to divert.
Remember, go back to the American Civil War.What sends the US Merchant Marine into the British registry is not the Commerce Raiders.Let me be clear about that.I know the Alabama.I went to the University of Alabama.I love the Alabama.Alabama sank 63 ships.That is a drop in the bucket of the size of the US Merchant Marine.And that was the most successful raider.What sent ships over into the British registry was insurance.
Insurance because the US Navy couldn't mitigate the threat.And because you couldn't mitigate the threat, ships left went over to that registry and they stayed in there because they found it to be more conducive.They got better protection.They got the Royal Navy.They could got better legal protection.In some ways, they can use crews from the British Empire which were much cheaper.And therefore you saw this massive flight from the flag.Could we see that again?I don't know.Know.It's an interesting topic that we need to be talking about.But again, it goes back to this issue about the US and the European Union trying to fight the Houthis militarily.But the issue here isn't just military.It's economic.It's political.
And that's sometimes what we forget.
The host wraps up the episode, previews upcoming videos on congressional sealift questions and the Viking Polaris incident, and thanks viewers for their support. He ends with a call to subscribe, comment, and support the channel.
Speaker A
I hope you enjoyed today's episode.There was a lot to go over, but hopefully you enjoyed the story, got a better understanding of what's going on with the world.I've got a couple of key videos coming out this week.Week.
There was a letter from Congress that just came out from Representative Gallagher's committee about Sealift.I'm going to be answering this question.It's addressed to General Van Oves, the head of Transcom, and the administrator of the Maritime Administration, Admiral Phillips.But I'm going to give my swipe at it and answer those five questions because I think they're really good.Also got a really interesting report just came out about the Viking Polaris.This was the ship that was sailing down Antarctica or coming back from Antarctica, got hit by a rogue wave and one person was killed on board.We're going to break that story down because believe it or not, the whole root of that incident boiled down to one simple mistake.And it's always incredible to me how in shipping that the slightest error can lead to a loss of life and you see it in that tragedy.
I hope you enjoyed today's episode.If you did.Hey, take a moment, subscribe to the channel and hit the bell.So be alerted about new videos as they come out.Leave a comment, share it across social media.Give it a big thumbs up.Thumbs up.And if you can support the page.How do you do that?Well, number one, you can hit that super thanks button down below where you can contribute directly to the page or head on over to Patreon.Become a monthly yearly subscriber.My Patreon patrons allow me to support keep this page up and running, so I thank them all the time.
I try to provide them early access to the videos when I have them and also field questions from them whenever they have it until our next episode.Is Sal signing off.