Chinese state-run shipping companies COSCO and CMES have reportedly stopped trying to send their oil tankers through the Strait of Hormuz, which is menaced by Iranian terrorism, and the Bab el-Mandeb Strait, which is under threat from Iran’s Houthi terrorist proxies in Yemen.
Industry executives and ship tracking services told Reuters on Tuesday that the massive shipping companies gave up on the straits after consulting with the Chinese central government about security risks.
According to these sources, CMES was the first to throw in the towel on the Strait of Hormuz in late July, but the decision has not been formally announced. Chinese executives who asked to remain anonymous said CMES told its investors that other shippers have decided not to risk the Bab el-Mandeb strait under threat from the Houthis, but CMES does not appear to have made a firm decision on that route.
CMES and COSCO have more than a hundred Very Large Crude Carriers (VLCCs) between them, with a total capacity of more than 200 million barrels of oil. A state shipping company executive told Reuters the ships “remain engaged,” but they have been using much longer routes to avoid the Iran conflict region, which does not please refinery customers who are thirsty for crude oil.
A new alternative is growing in popularity, according to ship tracking service Kpler: collecting oil with ship-to-ship transfers (STS) in the Gulf of Oman, outside of Iran’s attack range, and bringing the goods home to China. A Chinese shipping executive said the results so far have included “low risk and good profits.”
On Tuesday, Saudi Arabia’s national oil company Saudi Aramco began loading tankers at its Strait of Hormuz ports and offering supplies via STS to Asian buyers, with the transfers expected to happen in the Gulf of Oman near the United Arab Emirates (UAE) port of Fujairah.
The Saudi offers suggested they are confident of their ability to slip oil through the Strait of Hormuz without suffering Iranian attack, or have already done so. One way or the other, buyers in China and Southeast Asia will be happy to take safe delivery of heavy Saudi crude without suffering any of the risks of Iranian attack.
According to ship tracking service Vortexa, four of COSCO’s VLCCs, plus one operated by CMES, loaded oil by STS transfer off Fujairah in July. A dozen more are scheduled to perform similar transfers by mid-September.
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