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Tanker Shipping & Trade

China ignores US crude oil, while VLCC tonne-mile demand with Iran grows

Mon 19 Nov 2018 by Craig Jallal, tankers and markets editor

China ignores US crude oil, while VLCC tonne-mile demand with Iran grows
In the tit-for-tat trade war, US crude oil is not on the Chinese higher tariffs list, but imports have virtually been switched off

For the second month in a row, China has turned its back on US crude oil imports according to analysis by BIMCO’s chief shipping analyst Peter Sand. “The trade war between the US and China is now impacting trade in both tariffed and some untariffed goods with both countries looking elsewhere for alternative buyers and sellers.”

“Tonne-mile demand generated by total US crude oil exports has risen 17% from August to September but is down 4.8% from the record high in July. For the crude oil tanker shipping industry distances often matter more than volumes, with exports of US crude oil to Asia generating 74% of tonne-mile demand in September, up from 70% in August,” he said.

According to BIMCO, in 2017 Chinese imports accounted for 23% of total US crude oil exports. In 2018 that number was 22% during the first seven month but has dropped to 0% in August and September.

South Korea has become the largest long-distance importer of US crude oil at 1.1M tonnes in September, its highest level ever.

Similarly, the next top three overseas importers of US crude oil, namely the UK, Taiwan (both at 0.94M tonnes) and the Netherlands (0.74M tonnes) all imported more in September than ever before. Exports to Asia jumped in June and July, from a 43% share of total exports since the start of 2017 to reach a 56% share.

That share was down to 46% in August but climbed back to 51% in September. The two other major importing regions are Europe (33%) and North and Central America (13%), while South America (2%) and the Caribbean (1%) make up the rest (September share of exports in brackets).

China can rely on other sources for crude oil and Iran remains a major trading partner despite the US sanctions, and has made preparations to ensure security of supply for its crude oil requirements.

Using VesselsValue data, it would appear that in 2017, US-China completed VLCC voyages generated nearly 100Bn dwt nautical miles, the highest of any US-derived VLCC trade. China will still be the largest producer of tonne-mile demand for US-derived VLCC trades in 2018 (currently over 175Bn dwt nautical miles) but the VesselsValue data reinforces BIMCO's analysis by showing a dramatic decline in demand from July 2018 onwards.

China’s crude oil trade with Iran highlights a major problem with using AIS data to track tradeflows. The habit of the Iranian tankers going 'dark' (switching off the AIS), which is a potentially dangerous issue.

To illustrate this, Tanker Shipping & Trade analysed a snapshot of the 'recency' (the time and date of the last captured AIS signal) of the VLCCs in the Iranian fleet (NITC) and the Belgium fleet.

 

AIS recency Iran vs Belgium

A snapshot of AIS recency shows Iranian VLCCs are opaque compared to a similar sized Belgium fleet

Both fleets are a similar size of approximately 40 VLCCs each. The bulk of the Belgium VLCC fleet has broadcast AIS signals in zero to six hours (see chart), whereas the Iranian fleet leans towards recency of AIS broadcasts in the range of one to eight weeks.

What are the Iranian VLCCs up to? A more detailed analysis shows 23 of the Iranian VLCC's most recent voyages were from Iran to China or Iran to India and on to China. In each case the AIS signal disappeared for a period after leaving Iranian waters. Of course, there are many reasons for the AIS signal to disappear but the average number of days for the 23 NITC VLCCs was 18 days. The AIS signals reappear as the vessels approach the coat of China and/or India.


Maritime Strategies International oil & tanker markets director Tim Smith and Richardson Lawrie Associates director Charles Lawrie will assess the state of the crude oil, products and chemical tanker markets on the first day of the Tanker Shipping & Trade Conference, Awards & Exhibition, 20-21 November 2018 in London.

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