Penalties announced and implemented by China in response to the US port fees, according to traders and shipbrokers who requested anonymity due to the sensitivity of the matter, have prompted shipowners to review their corporate structures to reduce stakes of US entities or individuals. Some companies with more than 25% American ownership have begun removing China and Hong Kong from their list of desired destinations.
Traders and shipbrokers stated that a two-tiered market is emerging for ships willing and unwilling to go to China, with the first group demanding higher premiums, and the second group considering creative arrangements such as ship-to-ship cargo transfers during the voyage. As of Wednesday, some fully loaded ships were waiting offshore from Chinese ports.
China’s fees, implemented in response to a similar move by Washington, have disrupted Asian oil trade as shippers and traders try to assess their exposure to the fees and learn more about exceptions and exemptions. These taxes amount to over $6 million per voyage to China for oil supertankers. This is a very high amount that will negatively impact American shipowners and, ultimately, Chinese consumers.
Anoop Singh, head of global shipping research at Oil Brokerage Ltd., stated that even excluding Chinese-built ships and sanctioned tankers, approximately one-sixth of the world’s fleet of 877 VLCCs could be affected by Beijing’s measures, adding that this ratio could change as a clearer picture emerges for the industry. Singh said, “It’s not just the shortage of ships compliant with China’s rules, but also the uncertainty about what constitutes a China-compliant ship that is increasing freight costs in the near term.”
Traders and shipbrokers said that Beijing’s decision to penalize US-linked ships has increased the demand for documents proving that ships arriving at Chinese ports are owned by companies with less than 25% American stake. This situation has caused congestion at Chinese ports as charterers rushed to cancel or replace affected tankers.
While this plan has shaken freight rates in various shipping markets, very large crude oil tankers were among the most affected due to China being the world’s largest importer of crude oil. According to an analysis by shipbroker Poten & Partners, Unipec, the trading arm of China’s state-run major oil company Sinopec, was the world’s largest single spot charterer last year for ships carrying crude oil and fuel oil.
According to Baltic Exchange data, VLCC chartering costs from the Middle East to China have increased by 49% since China’s announcement. Costs for those from the US Gulf are 11.5% higher.
Source: Bloomberg
