VLCC freight rates soar past $1.2 million daily due to the Strait of Hormuz security crisis, marking unprecedented levels in the tanker market.
The security crisis in the Strait of Hormuz has led to historic pricing in the tanker market. As the daily equivalent earnings of VLCCs transporting crude oil from the Persian Gulf to China exceeded $1.2 million, the tanker market reached unprecedented levels.
The ongoing war in the Middle East and the transition risks in the Strait of Hormuz continue to disrupt the balance in global crude oil transportation.
According to Baltic Exchange data, the daily time charter equivalent earnings for a 270,000-ton VLCC on the TD3C route, which is the key indicator for the Persian Gulf-China route, reached approximately $1,212,000 on September 17.
Thus, VLCC freight rates have risen to levels previously unseen in the tanker market.
The $1 million threshold was surpassed within a few days.
The speed of the increase is also noteworthy.
In the Baltic Exchange's assessment on September 15, the daily equivalent earnings for a standard VLCC voyage between Saudi Arabia's Ras Tanura Port and China's Ningbo Port were at the level of $1,099,000.
This figure was calculated to be approximately $1,034,000 the day before.
By September 17, the indicator had risen to about $1.2 million.
At the beginning of September, the daily earnings on the same route were around $700,000.
The Hormuz crisis has tightened tanker supply.
The historic rise is attributed to the security issues in the Strait of Hormuz.
The significant decrease in commercial vessel transits in the region and some shipowners' reluctance to send vessels to the Persian Gulf due to high security risks are constricting the available tanker supply.
In contrast, Middle Eastern producers' need to maintain crude oil exports keeps tanker demand high, increasing competition for the limited number of available VLCCs.
As a result, freight rates demanded by shipowners for vessels willing to accept the risk of passing through Hormuz are reaching historic levels.
Kuwait Prosperity was fixed above $1 million.
The extraordinary conditions in the market are also reflected in the fixtures.
It has been reported that the VLCC named Kuwait Prosperity, operated by Sinokor and built in 2016, was fixed at WS1350 for a voyage from the Persian Gulf to the east for loading by Total Singapore on September 22.
The daily equivalent of this fixture is estimated to be above $1 million.
The Oman-China route has also surpassed $870,000.
The price increase is not limited to the Persian Gulf-China route.
As of September 17, the Baltic Exchange's Oman-China VLCC index rose to approximately $870,947/day.
On the West Africa-China route, daily earnings increased to about $524,575, while on the US Gulf-China route, it reached approximately $388,417.
These figures indicate that the Hormuz crisis is affecting not only the Middle Eastern tanker market but also the tanker supply in the Atlantic basin.
Tankers are heading to the Middle East.
High freight rates are attracting VLCCs from different regions of the world to the Middle East.
The increase in ship-to-ship oil transfers in the Gulf of Oman and tankers staying longer in the region while waiting for cargo further reduces the available capacity of the global VLCC fleet.
This situation is leading to a tightening of tanker supply and rising freight rates even on routes far from Hormuz, such as West Africa and the US Gulf.
The Cape of Good Hope route creates millions of dollars in additional costs.
Security issues in the Red Sea and Bab el-Mandeb are also increasing pressure on the tanker market.
According to calculations by Seatrade Maritime, a VLCC's journey while rounding the Cape of Good Hope instead of passing through the Suez Canal could extend the trip by approximately 18 to 20 days.
At the current high charter rates, this deviation is estimated to add an additional burden of about $11 to $14 million per voyage in terms of chartering costs alone.
The simultaneous impact of security crises in Hormuz and the Red Sea on global oil transportation is bringing the VLCC market into one of the most extraordinary periods in its history.
Source: SeaNews Türkiye
