Hormuz Risk Pushes VLCC Rates Above $510,000

Security risks around the Strait of Hormuz have pushed freight rates for very large crude carriers (VLCCs) transporting crude oil from the Middle East Gulf to China to near-record levels.

In the latest market fixtures, South Korea-based Sinokor was reported to have chartered the Angola Prosperity, a 2021-built VLCC with a capacity of 299,940 DWT, for Chinese oil company CNOOC. The Middle East Gulf–China voyage is expected to generate earnings of approximately $510,604 per day for the vessel. This level is close to the previous record of around $527,000 per day recorded in the VLCC market.

During the same period, the TD3C index for the Middle East Gulf–China route rose by 43.3 Worldscale points in a single session to WS475.6. This corresponds to an estimated time-charter equivalent of approximately $481,286 per day. As a result, the earnings on the relatively short Middle East–China route have risen to more than four times the levels seen on some longer-haul VLCC routes such as West Africa–China and US Gulf–China.

The main factor behind the sharp increase in freight rates is reported to be the security risk in the Strait of Hormuz, rather than oil demand. Although there is sufficient VLCC tonnage globally, the number of vessels willing to enter the Persian Gulf and transit the Strait of Hormuz remains limited, putting pressure on available tonnage.

This situation is prompting shipowners to demand higher freight rates for high-risk voyages, while charterers are also accepting higher prices in order to secure available tonnage. The approximately $510,000-per-day fixture for the Angola Prosperity is creating a new pricing reference for the market.

In addition to uncertainty around the Strait of Hormuz, continued security concerns in the Red Sea and Bab el-Mandeb are also affecting tanker positioning and insurance costs. As a result, if the elevated risk premium persists, VLCC freight rates could remain at high levels for some time.