COSCO Tanker’s 12,000-Mile Voyage May Come to a Halt Due to Iran Oil Sanctions

COSCO Tanker’s 12,000-Mile Voyage May Come to a Halt Due to Iran Oil Sanctions

September 27, 2019 by Bloomberg

By Serene Cheong, Debjit Chakraborty and Sharon Cho (Bloomberg) –More than two months and 20,000 kilometers (12,000 miles) ago, the tanker Da Yuan Hu left Singapore and headed to Mexico to pick up a shipment of crude oil. On Thursday, with less than two weeks to go until it reaches its destination, it found itself in geopolitical limbo.

The ship, along with dozens of others, is now ensnared in the standoff between the U.S. and Iran. The White House announced penalties against the vessel’s owner, China’s COSCO Shipping Tankers (Dalian) Co., in connection with violating sanctions by shipping Iranian crude. Indian Oil Corp. is considering alternatives to the Da Yuan Hu, according to people familiar with the situation who asked not to be named because the information isn’t public.

The announcements by the U.S. Treasury and State departments left shipbrokers and charterers scrambling to cancel bookings with sanctioned companies and letting provisional charters lapse. Uncertainty still remains on whether cargoes that have already been loaded onto the vessels of sanctioned firms would be allowed to deliver, or whether they would have to transfer their loads to unsanctioned tankers.

The Da Yuan Hu was supposed to transport oil from Mexico’s Dos Bocas to India’s eastern coast of Paradip, the people said. While the company is looking for a replacement, its plans may still change, one of the people said.

An Indian Oil spokesman declined to comment.

Supertanker Yuan Qiu Hu, earlier chartered by Atlantic Trading & Marketing Inc., a subsidiary of Total U.S., was headed to Galveston to pick up oil for delivery to South Korea. The vessel has since been adrift off the eastern coast of the U.S., after moving at a speed of more than 9 knots before the sanctions Wednesday.

ATMI is seeking to replace the Yuan Qiu Hu, helping to push up freight rates for supertankers hauling U.S. crude to Asia, according to people with knowledge of the situation. ATMI didn’t immediately return an e-mail seeking comment.

SK Innovation Co. Ltd., which had planned to charter the COSCO subsidiary’s Cosmerry Lake for shipping U.S. crude to Asia in October, is also looking for a replacement vessel after assessing the situation, according to one of the people with knowledge of the matter who asked not to be identified as the information is private. The Korean company had refrained from immediately responding to the U.S. move to sanction the COSCO subsidiary earlier.

The spot rates for supertanker voyages from Arab Gulf to China soared 41% to $47,480 on Thursday, data compiled by Bloomberg show.

In the shipping market, charterers were seeking more clarity on the ownership of vessels to be sure that they’re not a part of Cosco’s Dalian unit, according to shipbrokers.

COSCO Dalian is a unit of COSCO Shipping Corp., the biggest marine transport firm in the world by fleet size, according to Clarkson Research Services Ltd. The Dalian unit owns or operates anywhere from about 20 to 50 petroleum tankers worldwide, according to estimates from industry sources. Penalties don’t apply to COSCO’s parent or other subsidiaries, the Treasury Department said in a statement.

China Concord Petroleum Co., Kunlun Shipping Co., Pegasus 88 Ltd., and COSCO Shipping Tanker (Dalian) Seaman & Ship Management Co. were charged with knowingly violating restrictions on handling and transacting Iranian petroleum. Additional restrictions were also imposed on five executives at the companies, as well as Kunlun Holding Co. and the COSCO Dalian unit, which own or control one or more of the sanctioned entities.

–With assistance from Alaric Nightingale, Lucia Kassai, Dan Murtaugh and Andrew Janes.

© 2019 Bloomberg L.P