Chinese State Shippers Reroute Oil Tankers Around Gulf Chokepoints

Two of China's largest state-controlled shipping firms have stopped routing their oil tankers through the Strait of Hormuz and the Bab al-Mandeb, according to industry executives, tanker trackers, and a ship broker. COSCO Shipping Energy Transportation and China Merchants Energy Shipping (CMES) have kept their vessels clear of these chokepoints since late July, a move that has reshaped how crude reaches the world's largest importer.

The decision follows heightened security concerns in the region. Yemen's Houthis declared a maritime embargo against Saudi Arabia on July 20, while the Strait of Hormuz remains largely closed after a brief U.S.-Iran interim peace deal collapsed in June. Sources with direct knowledge of the matter said the shippers' decision came after communications with central authorities.

CMES told investors in late July that its vessels would not enter the Strait of Hormuz for the time being. The company also noted that other shippers had avoided Bab al-Mandeb, though it did not disclose its own policy for that passage. COSCO did not respond to a request for comment.

Together, the two firms control more than 100 very large crude carriers (VLCCs), each capable of carrying 2 million barrels of oil. Before the Iran war began in late February, they handled roughly half of China's crude imports from the Middle East. They do not transport Iranian oil due to sanctions.

Instead of transiting the Gulf, the shippers are now loading cargoes outside it. Ship-tracker Kpler data shows a surge in ship-to-ship transfers involving China- and Hong Kong-owned vessels in the Gulf of Oman, with volumes exceeding 600,000 barrels per day in June and July. There was no such activity in April and May, and less than 30,000 bpd in each of the first two months of the year.

"They are avoiding the two straits, but sending vessels to the new STS points outside the Gulf - low risk and good profits," said a Chinese shipping executive, referring to waters off Omani ports and the UAE's Fujairah, where most Gulf crude exports have recently been transferred to vessels bound for Asian buyers.

The rerouting has proven lucrative. Daily freight for the Oman-China voyage was assessed at $140,000 last Friday, translating into a per-tanker daily margin of roughly $110,000. Before the war, a VLCC generated $30,000 to $40,000 in daily profit on a similar route.

According to Vortexa, four COSCO-run supertankers and a fifth operated by CMES loaded oil via ship-to-ship transfers at Fujairah in July. A ship broker said about a dozen supertankers from each firm are slated for loadings outside the Gulf between August and mid-September, mostly at Fujairah and at or near Omani ports.

In a sign of caution, the Coslucky Lake, one of the last COSCO tankers to enter the Red Sea before the Houthis' blockade, changed course in early August and sailed without cargo through the Suez Canal to load Saudi oil from Egypt's Mediterranean port of Sidi Kerir, Kpler tracking shows.