The Impact of Sanctions on the Global Shipping Market
The cost to hire an oil supertanker on key routes to China has doubled since the US imposed sanctions on Russia, highlighting the significant impact on the global shipping market. This shift has disrupted a freight market that was previously dealing with softer demand due to supply curbs, a slow Chinese economy, and easing Middle East tensions.
Market Disruption and Increased Demand
The sanctions have led to a rapid shrinkage in the pool of available ships, intensifying competition on certain routes. Daily rates for very-large crude carriers (VLCCs) on the Middle East-to-China route surged 112% to $57,589, according to Baltic Exchange data. Rates for the US Gulf-to-China journey jumped 102%, while West Africa-to-China saw a 90% increase.
Chinese Refiners’ Response
Major Chinese refiners have been rushing to buy crude from the Middle East, Africa, and the Americas to compensate for the loss of Russian oil. A VLCC from the US Gulf to China was hired for $9.5 million last week, compared to a low-$7 million range over the last couple of months. Indian Oil Corp. is also increasing its purchases of Middle Eastern barrels, adding to the pressure.
Potential Future Implications
There is concern that tanker rates could remain elevated if President-elect Donald Trump takes a tougher line against Tehran. Rates could hold at these levels if Trump increases pressure on Iranian oil shipments, which is likely, according to Junjie Ting, a Singapore-based shipping analyst at Oil Brokerage Ltd.
Impact on Smaller Vessels
The rising demand for VLCCs is also affecting costs for smaller vessels. Rates for Suezmaxes, which hold about 1 million barrels, have climbed due to increased demand and tight supply, as reported by shipbroker SSY.
Conclusion
The sanctions on Russia have significantly impacted the global shipping market, leading to increased demand and higher rates for oil supertankers. Chinese refiners’ response and potential future actions by the US administration could further influence these trends.
Leave a Reply