IN Brief:
- COSCO Shipping Energy and China Merchants Energy Shipping have avoided Hormuz and Bab al-Mandeb since late July.
- Ship-to-ship transfers near Fujairah and Oman are allowing Chinese-controlled VLCCs to collect crude outside higher-risk waterways.
- Longer voyages and reduced vessel utilisation are tightening tanker capacity while freight rates remain elevated.
COSCO SHIPPING Energy Transportation and China Merchants Energy Shipping have, according to industry executives and ship-tracking data, kept tankers away from the Strait of Hormuz and Bab al-Mandeb since late July. Their crude supply network is increasingly relying on loading and ship-to-ship transfers outside the highest-risk waterways.
The two state-controlled operators previously handled roughly half of China’s crude imports from the Middle East and together control more than 100 very large crude carriers. A VLCC can carry around two million barrels, giving changes in the deployment of those fleets sufficient scale to affect tanker availability well beyond the individual voyages involved.
Rather than sending Chinese-controlled ships into Gulf terminals, more cargo is being transferred around Fujairah in the United Arab Emirates and at locations around Oman. Ship-to-ship transfers allow crude to be carried through the vulnerable section by another vessel before being handed over to the VLCC that will complete the longer voyage to Asia.
Tracking data show China- and Hong Kong-owned vessels handling more than 600,000 barrels per day through ship-to-ship transfers in the Gulf of Oman during June and July, a marked increase from earlier periods. The arrangement has moved from an occasional contingency towards a repeatable operating method as security conditions remain unstable.
That shift does not remove transport risk; it redistributes it. Ship-to-ship transfers require two compatible vessels to meet in an approved area with suitable weather, crews, hoses, fenders, communications, documentation, and safety procedures. Timing errors or a lack of suitable receiving tonnage can delay the cargo even when the crude itself is already outside the strait.
Vessel utilisation is affected as well. Tankers avoiding direct Gulf calls can spend more time repositioning, waiting, or taking longer routes, reducing the number of voyages each vessel can complete. A fleet can therefore remain fully employed while providing less effective transport capacity to the market.
Freight pricing reflects that constraint. Oman-to-China VLCC rates have reached around $140,000 per vessel per day during the current disruption, several times levels seen before the conflict intensified. Higher earnings compensate owners for scarce capacity and risk, but the additional transport cost is ultimately embedded in the delivered economics of crude reaching Asian refiners.
The rerouting extends beyond Hormuz. One COSCO tanker that had entered the Red Sea to load Saudi crude at Yanbu subsequently turned north, passed through the Suez Canal without cargo, and loaded from Egypt’s Mediterranean terminal at Sidi Kerir. That creates a much longer voyage structure, but avoids taking the loaded tanker through Bab al-Mandeb.
Other suppliers are adapting around the same constraints. Saudi Aramco has offered Asian buyers crude through ship-to-ship transfers off Fujairah and, on 20 August, had sold at least four million barrels to Chinese customers using loadings arranged outside Hormuz. Alternative collection points are therefore becoming part of the supplier side of the market as well as an operating choice by Chinese shipowners.
Traffic through Hormuz remains thin despite some resumed movements. Only a handful of commodity vessels have been making daily transits during recent periods, far below normal traffic levels. A waterway does not need to be physically sealed to lose much of its commercial capacity; shipowners and charterers can restrict movements themselves when the perceived risk exceeds the value of the voyage.
That distinction complicates supply planning. Official statements that a route is open provide limited comfort if suitable tonnage is unwilling to use it, insurance costs become prohibitive, or charterers impose restrictions on vessel deployment. Effective capacity is determined by the ships prepared to sail, not simply by whether navigation remains legally possible.
China’s demand means the workaround has to operate at scale. Excluding sanctioned Iranian supply, China imports several million barrels per day of Middle Eastern crude, much of it transported in VLCC parcels. Sustained avoidance of the two chokepoints therefore requires enough alternative loading capacity, transfer equipment, offshore slots, and ships to maintain refinery feedstock flows.
The current model is delivering cargo, but it uses more transport resources to achieve the same result. A barrel handed between vessels outside Fujairah and then carried on a longer route requires more coordination and vessel time than a straightforward terminal loading. That additional complexity is the price being paid to keep the physical supply chain functioning without exposing the largest Chinese tanker fleets directly to the highest-risk passages.
If the disruption persists, temporary workarounds can become semi-permanent operating infrastructure. Fujairah, Omani loading locations, Sidi Kerir, ship-to-ship capacity, and alternative routes are already taking on greater importance. The oil is still moving towards China, but every additional transfer and voyage day consumes capacity — resilience in this case is keeping cargo moving through a network that has become more expensive and less efficient by design.
