An interesting theory about favouritism towards Chinese interests in the tanker freight and insurance markets amid tensions in the Middle East has failed to pan out.
Some analysts had suggested that China-flagged and Chinese-owned tankers could be favoured in the Middle Eastern trade, with the recent tanker incidents in the Middle East Gulf seen as part of the wider geopolitical conflict between Iran and the West.
However, market participants told TradeWinds that such windfalls for vessels with Chinese backing have yet to emerge.
“I didn’t really see Chinese ships being treated differently in the freight market,” said an official with a Chinese state owner.
An Asia-based product tanker owner shares the same opinion that no such Chinese premiums exist.
Cosco Shipping Energy Transportation, the country’s top tanker owner, has recently deployed more of its LR1s on the China-South East Asia route, the owner added.
According to market participants, the oversupply of tonnage continues to plague tanker markets in the Middle East, with few incentives for charterers to offer premiums for Chinese ships.
Despite the apparent war risks, owners are generally willing to continue trading in the Middle East Gulf, they said.
Moreover, Chinese officials pointed out that China-linked ships have not enjoyed lower insurance quotes. “The owner’s nationality is not a determining factor for insurance premiums for tankers,” the Chinese owner told TradeWinds.
After six attacks on tankers near the Strait of Hormuz in May and June — which the US blames on Iran — the UK seized the 300,600-dtw VLCC Grace 1 (built 1997) off Gibraltar for allegedly carrying Iranian oil to Syria in early July.
In retaliation, Iran arrested the 49,700-dwt, UK-flag product tanker Stena Impero (built 2018) on 19 July.
However, Chinese tankers are expected to see little threat from operating in the Gulf, because Tehran needs to maintain a friendly relationship with Beijing.
China is one of the few countries willing to buy Iranian oil in the face of US sanctions.
“Since politics is a driving factor in the current conflict, politics should be factored into the war risk rates,” said Lars Gustafson, managing director of Gallagher’s marine practice.
“If an underwriter was to subscribe to this theory, Chinese tankers carrying oil for Chinese interests should be viewed as a better risk than tanker interests with ties to the West.
“Unlike floating mines seen in previous conflicts, the losses sustained in the Gulf appear to be very targeted. Since London underwriters do not have a ‘one rate fits all’ approach, marine brokers and underwriters must take a closer look at all the risk factors to differentiate between risks.”
