Ten HOT Nuggets
10 | Smooth Sailing
It has been over a year since the Red Sea crisis began, triggered by strikes on Israel from Iran-backed Houthis. Since then, scores of ships in the Red Sea, Gulf of Aden, Arabian Sea, and Indian Ocean have been attacked, forcing hundreds of vessels to reroute around the Cape of Good Hope instead of passing through the Suez Canal.
As a result, transits around the Cape of Good Hope have increased by 75% compared to pre-conflict levels, while Suez Canal transits have plummeted to near all-time lows, down 65% since the conflict started.
The Suez Canal has also reached a milestone in recent weeks, as daily transits have fallen below Panama Canal transits for the first time in history.
On a positive note, transits through the Panama Canal are increasing, thanks to improved water conditions that have enabled a higher number of daily crossings.
This marks the first time since October 2023 that transits have surpassed the previous year's 7-day moving average:
9 | Capitalizing on the Canal
Speaking of the Panama Canal, the Panama Canal Authority posted a $3.45 billion profit in the fiscal year ending September 30, despite drought-driven shipping reductions.
Canal profits increased 9.5% year-on-year as operation costs were cut by 5% and revenues increased slightly, despite a reduction in deep-draft transits.
The canal recorded 7,088 panamax and 2,856 neopanamax transits totalling 423 million tonnes (equivalent of 19.5 million legally loaded semi trucks) in FY24, down 23% from the year prior.
One of those 7,088 transits included a LNG carrier that Japan’s Eneos Group paid $3.975 million on top of normal transit fees to skip the line amid long wait times in November 2023.
The Canal Authority projects it will see more than 12,500 transits in FY25 and intends to introduce incentives aimed at attracting more vessels ~especially bulk carriers~.
What’s that mean for ag?
Incentives could help narrow the spread between US PNW and Gulf freight, potentially bringing a competitive edge back to the US Gulf which disappeared over the course of the past year as long wait times impacted Gulf-to-Asia transport.
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8 | Greenback’s gaining steam
The US Dollar Index traded to new highs for the move again today, rallying more than 6% of its late-September lows.
7 | Relationship status: It’s complicated
Historically, commodities have had an inverse relationship with the dollar, until the many anomalies of the Covid era disrupted the pattern:
Interesting to look at the past year though as the U.S. dollar index and commodities have been moving in lockstep until the past few weeks as Trump’s victory shot the dollar into new highs:
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