A new era for shipping dawned on October 14th, following the mutual imposition of port duties by the USA and China.
Beijing’s response with countermeasures on vessels connected to the USA adds to the duties Washington had announced some time ago, leading to a new state of affairs for the shipping enterprise.
Gibson, in its recent analysis, focuses exclusively on the impact of China’s special duties on tankers. As the chartering brokerage firm points out, American shipowners may be few and the fleet of tankers built in the USA or flying the American flag may be small, however the managed fleet is quite large, as the major oil companies time-charter these specific vessels for long periods.
At the same time, the situation appears murky regarding the criterion of 25% control of company shares by American legal or natural persons. A significant number of companies have complex structures and the actual ownership can change over time. In fact, there are several companies outside the USA, particularly in Greece and Scandinavia, listed on the NYSE or Nasdaq, which further complicates the boundaries between “US-connected” and “international” regarding the application of the Chinese measures.
When all companies listed in the USA are considered, the percentage of vessels subject to China’s duties increases. For tankers, the average percentage is around 17%, when vessels built in China are excluded, although the percentage varies depending on the vessel’s capacity, Gibson explains. Correspondingly, some large owners who are listed in the USA, particularly those not headquartered in the USA, may fall below the 25% threshold and, therefore, be excluded. Conversely, some companies with no obvious ties to the USA may still hold US equity share capital equal to or above 25%.
According to Gibson, VLCCs have the greatest exposure to China’s special duties, as 38% of these flows last year ended up in the Asian giant. The VLCC market is already very tight, supported by the increase in crude oil production from OPEC+, refinery maintenance, the reduction of direct crude oil burning for power generation in the Middle East, and the greater transportation of crude oil from the Atlantic basin to the East during September.
However, at least in the short term, a market restructuring is expected, as some shipowners may redirect their vessels away from China, while congestion is likely to increase in Chinese ports.
In the long term, the market will adjust. Companies with shareholding composition affected by the duties may explore structural options to limit their exposure, although this is likely to take time and have implications for their stock prices. The question remains as to what extent the two economic giants will sit at the negotiating table, with the confrontation being resolved over time.
