China Urges Protection Of Ships In Strait Of Hormuz As Tanker Traffic Plunges 80% & VLCC Rates Hit $424,000

China has called on all parties involved in the escalating Iran conflict to ensure safe navigation through the Strait of Hormuz after tanker traffic in the vital waterway dropped sharply and shipping costs hit record highs.

The disruption began after the United States and Israel carried out missile strikes on Iran over the weekend, followed by Iran’s retaliation in the region.

The crisis threatens nearly one-fifth of global seaborne crude oil and liquefied natural gas (LNG) shipments. Energy and freight rates have risen quickly, raising concerns in major importing regions across Asia and Europe.

The Strait of Hormuz is a narrow passage connecting the Persian Gulf to the Gulf of Oman. It carries around 20% of global seaborne crude oil, 20% of LNG tanker traffic, and roughly one-third of widely traded fertiliser shipments.

Data from marine intelligence firm Windward showed that only seven vessels transited the strait on 2 March, compared with a daily average of 79 ships. That means traffic has fallen by about 80%.

At least 150 tankers carrying crude oil, LNG and refined oil products dropped anchor in the Gulf over the weekend. According to the International Chamber of Shipping, these vessels represent about 4% of the global tanker fleet by tonnage.

The near halt of shipping through the Strait of Hormuz has blocked exports from Saudi Arabia, the United Arab Emirates, Iraq, Kuwait and Iran.

China’s Foreign Ministry urged “all parties to immediately cease military operations, avoid escalating tensions and safeguard the safety of navigation in the Strait of Hormuz.”

China is the world’s largest energy importer and the biggest buyer of Iranian crude. It also depends heavily on oil and LNG supplies from the Persian Gulf region. Around 30% of China’s LNG imports come from Qatar.

Chinese officials have reportedly urged Iran not to target oil and LNG tankers or strike export hubs such as Qatar.

After an Iranian drone strike on March 2, Qatar halted production at Ras Laffan, the world’s largest LNG export facility. This was the first full shutdown in nearly 30 years. Qatar accounts for about 20% of global LNG exports.

Saudi Arabia also halted production at its largest domestic refinery. Parts of oil and gas production were suspended in Israel and in Iraq’s Kurdistan region.

Alternative export routes are limited. Saudi Arabia’s east-west pipeline and smaller pipeline systems in the UAE and Kurdistan can handle some supply, but they cannot replace the large volumes normally shipped through the Strait of Hormuz.

Oil and gas prices rose again on Tuesday as supply concerns increased.

Tanker charter rates have surged sharply. The spot rate for a Very Large Crude Carrier (VLCC) traveling from the Middle East to China jumped above $424,000 per day. In recent weeks, the same route averaged around $100,000 per day.

Major maritime insurers have cancelled war risk coverage for ships operating in the Gulf. London’s marine insurance market has expanded its high-risk zones to include waters around Bahrain, Djibouti, Kuwait, Oman and Qatar.

Shipowners are now reviewing voyages through the region due to safety concerns for crew members.

Major container lines including Maersk and Hapag-Lloyd have rerouted ships around the Cape of Good Hope following renewed threats from Iran-backed Houthi forces.

According to Windward, diversions around southern Africa rose by 112% on Monday. This suggests longer-term route changes rather than temporary adjustments.

France-based carrier CMA CGM has suspended bookings that require loading or discharge at ports in Bahrain, Kuwait, Qatar, most Saudi Arabian ports, most Iraqi ports and the UAE, except Fujairah and Khor Fakkan.

Longer routes mean more sailing time, higher fuel consumption and schedule delays, increasing pressure on global supply chains.

The Strait of Hormuz has faced tensions in the past but has rarely experienced prolonged traffic stoppages, even during regional conflicts.

References: theguardian, bloomberg

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