Global shipping costs are ballooning. Except this time, the culprit is not container freight rates, but rather those for shipping essential fuels worldwide. While the benchmark Shanghai-Los Angeles container shipping rate has fallen steeply, tanker freight rates for LNG, diesel, and crude are spiking.
The main culprit is a supply crunch. Thanks to the disruption in the international energy market caused by the Russia-Ukraine war, ships are having to transport fuels a greater distance, keeping them occupied for longer and pushing up rates. First and most obviously, European countries are replacing Russian supplies with more distant ones. Moreover, Russian fuels spurned by Europe now have to be shipped farther to Asian buyers. For example, Gazprom’s first LNG shipment from its new Portovya plant appears to be headed straight for India. Another contributing factor: China’s plans to boost crude refining rates, which will add to global supplies and ease fuel prices, but also push up supertanker freight rates as China imports more crude feedstock from the US Gulf and the Middle East.
This creates a potential energy threat for even those Asian economies that are retaining access to Russian sources: While they may benefit from buying Russian energy supplies at a discount, the tight spot market and the rally in tanker freight rates could put them in a bind if winter turns out to be colder than expected. And Japan is already forecasting a frigid winter, which will further squeeze global LNG supplies.
German industry notched a record rise in producer prices of industrial products, with an increase of 46 percent in August from the same period last year. This spike is driven in large part by energy prices, which are up 139 percent from last year. Factories in the country – and in the bloc more broadly – are being forced to cut production; in an emergency move, Berlin is nationalizing German gas giant Uniper as the energy squeeze threatens to push it out of business.