The escalating trade tensions between the U.S. and China are sending shockwaves through the global shipping industry, and the cost of moving crude oil is skyrocketing as a result. Supertanker freight rates have surged dramatically this week, fueled by a tit-for-tat battle over port fees and the fallout from U.S. sanctions on a major Chinese oil terminal. But here's where it gets controversial: China's retaliatory port fees, announced just days ago, could add a staggering $7 per barrel to shipping costs for U.S.-linked vessels—equivalent to a jaw-dropping $15 million charge. This move, aimed at U.S.-affiliated Very Large Crude Carriers (VLCCs), is likely to deter companies from chartering such ships, further complicating an already strained trade relationship.
An aerial view of a crude oil tanker off Waidiao Island in Zhoushan, Zhejiang province, China, captures the epicenter of this growing crisis. As of Monday, the VLCC spot rate for the Middle East to Asia route (TD3C) hit a two-week high of W98 on the Worldscale measure, according to LSEG data. While rates dipped slightly to W95 by Wednesday, they remain significantly higher than the W70 levels seen just a week ago. And this is the part most people miss: China’s exemption of its domestically built ships from these fees has created a glimmer of relief, but it also raises questions about fairness and the broader implications for global trade.
China’s retaliation comes in response to earlier U.S. port fee hikes on Chinese vessels, with both sets of levies taking effect this week. June Goh, a senior oil market analyst at Sparta Commodities, explains, 'The rates are up because the pool of tankers that can avoid these hefty fees is shrinking.' However, she adds, 'China’s exemption for its own ships does offer some reprieve.' Yet, shipowners of non-U.S. tankers may demand premiums, potentially pushing freight rates even higher. Clarksons Research estimates that about 12% of the global crude tanker fleet could be subject to China’s fees, despite the exemption for Chinese-built vessels.
The situation is further complicated by U.S. sanctions on Shandong’s Rizhao oil terminal, which has forced trading firms to reroute ships to Zhoushan, another major hub on China’s east coast. This diversion risks creating congestion at Zhoushan, a key transfer point linked to Sinopec refineries and Rongsheng Petrochemical. Brendan Bos, a market analyst at Gibson Shipbrokers, notes, 'The Rizhao sanctions have already caused trade inefficiencies, though the medium-term impact may be muted as new outlets for crude are found.' The Rizhao terminal, partially owned by a Sinopec logistics unit, was among the entities sanctioned by the U.S. Treasury, alongside ships involved in transporting Iranian oil and liquefied petroleum gas.
Looking ahead, the number of VLCCs needed to transport cargoes from the Middle East, Europe, Africa, and the U.S. to Asia is expected to rise in October, further supporting elevated freight rates. Current TD3C rates are nearing two-year highs seen in September, when tanker supply tightened due to increased Middle East exports and arbitrage supplies to Asia. But here’s a thought-provoking question: As these trade tensions escalate, who will bear the brunt of these rising costs—consumers, oil companies, or governments? And could this be the tipping point that forces a reevaluation of global trade dependencies? Share your thoughts in the comments below.
