Recent US sanctions against Russian entities, blacklisting over 180 vessels, have significantly disrupted the tanker market. This has led to a surge in demand for non-sanctioned tonnage, driving Aframax tanker freight rates for the Kozmino-to-China route to a record high of $7 million on January 21st, according to S&P Global Commodity Insights data, reports S&P Global.
Decline in Ship Availability
Before the recent geopolitical events, the average freight rate for the route was $560,000. However, following Russia’s invasion of Ukraine, rates surged above $1 million in mid-April 2022 and have remained elevated since.
This significant increase in freight rates was primarily driven by a sharp decline in ship availability. The imposition of stricter sanctions by the EU and UK on Russia discouraged many ships from calling at Kozmino, leading to a supply shortage of Aframax tankers.
Further compounding the issue, Shandong ports have banned US-sanctioned tankers from entry. This has further exacerbated the ship shortage and forced charterers to pay a premium to secure non-sanctioned tonnage.
Intensified Competition
According to S&P Global Commodities at Sea, between June and December 2024, 71 ships loaded ESPO crude in Kozmino. Of these, 56 were listed on the OFAC-sanctioned list, significantly limiting the available eligible tonnage to just 16 ships.
This restricted supply has exacerbated the tight market conditions, pushing freight rates to unprecedented levels. Currently, the freight rate to deliver ESPO crude to North China ports is approximately $70/mt, translating to a time-charter equivalent of $500,000/day.
The monthly count of shipments from Kozmino fluctuated in the latter half of 2024, peaking at 30 in August before declining to 24 in December, according to CAS data.
The limited availability of ships has intensified competition among charterers, further driving up freight rates. As one broker stated, “Freight rates have increased by more than 3-4 times because the number of available ships has decreased by 3-4 times.”
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Source: S&P Global
