Gibson states that China’s response to the U.S. Trade Representative’s (USTR) Section 301 measures has very serious consequences for tanker owners, even though the majority of vessels used in international trade are not built in China, do not fly the Chinese flag, or are not Chinese-owned.
The London-based shipbroker notes that China’s retaliatory tariffs are applied to all vessels calling at Chinese ports that have clear connections to the U.S. These tariffs also apply to vessels owned or operated by U.S. companies or individuals; vessels owned or operated by entities in which U.S. companies, organizations, or individuals hold, directly or indirectly, at least a 25% stake (voting rights in board memberships); and vessels flying the U.S. flag or built there.
Vessels built in Chinese shipyards and vessels arriving in ballast for repairs are exempt from the application.
However, Gibson states that the new port fees for tankers subject to the regulations are high. VLCC owners will have to pay approximately $6 million for each port call, while medium-range tanker owners will face fees of around $750,000.
The 25% shareholding control test could pose a challenge. The broker notes that many publicly listed shipowners have complex corporate structures, and the actual ownership of a vessel can change over its lifetime. Both Greek and Scandinavian tanker owners are listed on the New York Stock Exchange or Nasdaq, which raises further questions about the terms “U.S.-linked” and “international” used in China’s countermeasures.
Gibson estimates that 17% of tankers owned by publicly listed companies in the U.S. (excluding those built in China) could be affected by this situation. However, at this stage, this estimate is described as a “general estimate,” as some tanker companies with U.S. links may remain below the 25% threshold. On the other hand, some companies with no apparent connection to the U.S. may have significant U.S. equity holdings at or above the 25% threshold.
According to the broker’s statistics, VLCCs are the tanker class most at risk. This is because China is the single largest destination for such vessels, accounting for approximately 38% of last year’s export trade volume. However, other tanker classes will also feel the impact of this effect.
In the short term, China’s response to the U.S. could cause more volatility in an already tight market. The broker stated that among these factors are the steady increase in production quotas among OPEC+ members, decreased consumption for power generation in the Middle East, refinery maintenance, and a stronger pull of Atlantic Basin crude oil eastward in September.
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