Oil Traders Shun China-Made Ships for U.S. Flows Over Trump Levy
Oil traders looking to book vessels calling at U.S. ports are scrambling to avoid Chinese-built vessels, after President Donald Trump proposed a hefty fee on the vessels in an effort to revive American shipbuilding.
Charterers booking vessels to carry cargo that will be loaded from, or discharged at, U.S. terminals are asking for vessels that were not built in Chinese shipyards, according to people involved in the market. The requests come when traders have alternatives, such as South Korean-built tankers, said the people, who declined to be identified discussing sensitive commercial matters.
Some Chinese-built vessels are now being refitted at lower rates. The Shanghai-built Olympic Sky was chartered for the U.S. Gulf Coast to Continental route at 167 points on the world scale this week, according to schedules. That’s about 10% lower than a separate booking for the South Korean-built Rivera, which was set at 185 points on the world scale for the same trip in the first half of April.
While Trump’s plan has not been finalized, the distortion in tariffs is an indication of the disruption that could come as a result of Washington’s proposed levy of at least $1 million every time a Chinese-built or operated vessel enters a U.S. port.
“Implementation of the rule as proposed would render a significant portion of the tanker fleet uneconomic” for U.S. trade, Poten & Partners Inc. wrote in a note last week. Companies seeking to secure vessels on long-term charters are excluding Chinese vessels from their inquiries, brokers and shipping consultants said.
Some shipowners have changed charters to pass on the U.S. levy on companies that lease their vessels. Sales of used Chinese bulk carriers, which carry raw materials ranging from grain to metals and coal, have stalled, while orders for new vessels built at Chinese shipyards have slowed. China has grown rapidly to dominate world shipbuilding. Although South Korean-built oil tankers make up a much larger share of the global fleet in operation, more than 70% of the tankers currently under construction are being built at Chinese shipyards, according to Clarksons Research Services Ltd., the world’s largest shipbroker.
Brent futures were down $1.97, or 2.63%, to $72.98 a barrel by 0635 GMT after dropping by as much as 3.2% earlier, the biggest daily percentage decline since March 5. U.S. West Texas Intermediate crude futures were down $2.01, or 2.80%, to $69.70 after slipping by as much as 3.4% earlier.
Source: Bloomberg
