Supertanker freight rates surged this week and are expected to remain elevated as the US-China trade dispute deepens, with tit-for-tat port fee hikes and concerns mounting over US sanctions on a major Chinese crude oil terminal.
Chinese retaliatory port fees announced on Friday would add more than $7 per barrel in shipping costs for a very large crude carrier (VLCC) linked to the US, traders estimated. That would equate to a charge of about $15 million — enough to deter many from chartering US-related ships.
The VLCC spot rate for the Middle East to China route, known as TD3C, hit a two-week high on Monday at W98 on the Worldscale industry measure used to calculate freight rates, according to LSEG data. By Wednesday, it had slipped slightly to W95, or about $6.2 million in lump-sum payment, but remained well above levels of around W70 a week earlier.
The rally in rates followed China’s announcement that it would impose additional port fees on US-linked vessels — a retaliatory move against US port fee hikes for Chinese ships earlier this year. Beijing later clarified that Chinese-built ships would be exempted, with both sets of levies taking effect on Tuesday.
“The rates are indeed up as it reduces the pool of tankers available that meets the criteria to avoid incurring the hefty loadport fees,” said June Goh, Senior Oil Market Analyst at Sparta Commodities. “However, since China is now exempting China-made vessels from the ruling, there is a bit of reprieve there,” she added.
A shipbroker, who declined to be named due to company policy, said owners of non-US tankers might demand a premium, potentially driving freight rates even higher.
Clarksons Research estimated on October 12 that about 15 per cent of the world’s crude tanker fleet would be affected by China’s port fees on US-related vessels — an estimate made before Beijing announced exemptions for Chinese-built ships.
The recent US sanctions on the Rizhao oil terminal in Shandong province have further contributed to market disruption, forcing trading firms to divert ships to Zhoushan on China’s east coast. The move may create congestion at the transfer hub connected to major Sinopec refineries and Rongsheng Petrochemical, traders said.
“The sanctioning of the Rizhao Oil Terminal contributed to freight volatility in the East,” said Brendan Bos, Market Analyst at Gibson Shipbrokers. “It has already led to greater trade inefficiencies as several VLCCs have diverted, though it is likely that new outlets for the crude will be found and that the medium-term impact will be muted.”
The Rizhao Shihua Crude Oil Terminal, half-owned by a Sinopec logistics unit, was among entities listed by the US Treasury in a new round of sanctions targeting ships carrying Iranian crude oil and liquefied petroleum gas.
The same unnamed shipbroker said the number of VLCCs needed to carry cargoes from the Middle East, Europe, Africa, and the US to Asia is likely to rise in October compared to September, supporting freight rates.
Current TD3C rates remain close to the more-than-two-year highs of around W108 seen in September when tanker supply tightened amid increased exports from the Middle East and more arbitrage flows to Asia.
(Reporting by Florence Tan and Jeslyn Lerh; Additional reporting by Sam Li in Beijing; Editing by Edwina Gibbs)
