Tanker trade patterns shift in face of US port tariffs

Looming US port tariffs on Chinese-owned or operated vessels have already affected shipping markets and will continue to cause shifts in trading patterns, amid ongoing uncertainties.

The US Trade Representative announced fees on ships that are either China-built or have Chinese owners or operators, as part of its Section 301 Investigation into China’s maritime, logistics, and shipbuilding sectors. Chinese-built ships are eligible for certain exemptions, which do not extend to Chinese-owned or operated vessels. They take effect Oct. 14.

The impact is less dramatic for tankers than for other sectors, Fotios Katsoulas, a shipping analyst at S&P Global Commodity Insights said Oct. 7.

Some 16%-18% of US cargoes of crude and products in 2024 were carried on what will be liable tankers, but from October that figure will be less than 5%, Katsoulas said. This will be further affected by factors such as higher volumes of ship-to-ship transfers in the Caribbean and Canada, he said.

Scorpio Tankers estimates 7% of US exports and 9% of US imports on Long Range tankers and could be affected by the measures.

“We see only a limited impact on supply-demand fundamentals for both clean and dirty product markets,” a spokesperson for tanker firm Hafnia told Platts, part of S&P Global Commodity Insights. “Any effect is likely confined to minor inefficiencies, as most segments used in US trade remain exempt, subject to change.”

The US imported 1.15 million b/d of clean products in 2024, data from S&P Global Commodities at Sea(opens in a new tab) shows. Of these, the bulk came from Canada at 238,000 b/d, followed by 198,000 b/d from South Korea and 107,000 b/d from the Netherlands.

In terms of crude, the US loaded 3.83 million b/d for export in 2024. Of which, 518,000 b/d went to the Netherlands, 463,000 b/d to South Korea, 332,000 b/d to the UK and 284,000 b/d to Canada.

Mixed tanker impact

The majority of Chinese-owned and operated crude tankers operate east of the Suez Canal rather than west of it, so their exposure to the US tariffs is limited. The exemptions for Chinese-built ships operated by non-Chinese companies mean that plenty of crude-carrying tonnage is exempt from the fees, and so Section 301 should not have a significant impact on US crude exports, ship brokerage BRS said Oct. 6.

In contrast to crude tankers, Medium Range product tankers could face greater repercussions. More than 20% of the MR2 fleet is Chinese-owned or operated, and these ships have traditionally traded globally. The US is the main gasoline importer and diesel exporter in the Atlantic and has by far the largest influence over the fortunes of MR2s in the region, BRS said.

If an MR2 cannot access US markets, then there seems “little economic incentive for such a ship to remain in the region,” and a number of Chinese-linked ships have left the region already, the brokerage said.

Atlantic MR rates have shown an unclear direction. Platts assessed the rate to carry a 37,000 metric ton cargo of clean products from the UK/Continent to US Gulf Coast at $24.76 on Oct. 8, largely rangebound since July.

Platts assessed the rate to carry a 270,000 mt cargo of crude from the USGC to China at $37.04/mt, down from $46.41/mt on Sept. 17.

Exemptions apply

There are a number of exemptions; for example, for Chinese-built ships under 55,000 dead weight tons, but these exemptions do not apply to those under Chinese ownership or management and a good degree of uncertainty over the rules’ interpretation remains.

The measures, unveiled following a year-long Section 301 investigation initiated under the Biden-Harris administration, aim to boost US shipbuilding and counter China’s dominance in global maritime sectors amid trade tensions between the world’s two largest economies.

For a Chinese-owned or operated ship, an initial tariff of $50 per net ton per port call or rotation of US port calls applies, with no exemptions, and it will increase over the next three years.

Unclear distinctions

As it stands, ships subject to Chinese lease financing are expected to be classified as Chinese-owned, and here a significant impact has already been felt, analysts at ship brokerage Gibson said in September.

“Substantial efforts to diversify away from facilities with Chinese lessors have been seen in recent months, as lessors are facing early repayments and lower demand,” Gibson said. “These vessels would in effect be excluded from the US market, as the costs incurred would make these vessels uncompetitive.”

The USTR published its first proposal on the port fees in February before watering them down significantly, having received hundreds of negative comments.

“Washington appears to have sidestepped the thorny issue of what constitutes a Chinese-owned or operated ship as the burden of compliance falls entirely with the vessel operator, not the US Customs and Border Protection department,” BRS said.

Source: Platts