China Merchants Energy Shipping: Mideast impact is controllable

China Merchants Energy Shipping: Mideast impact is controllable

China Merchants Energy Shipping: Middle East Impact on VLCC Market Remains Controllable

China Merchants Energy Shipping (CMES), one of Asia's largest operators of very large crude carriers (VLCCs), has reaffirmed its confidence in the resilience of the global supertanker market despite geopolitical turbulence in the Middle East. The company anticipates sustained strength in VLCC freight rates through 2026 and into 2027-28, driven by constrained tanker supply and robust demand dynamics.

The Persian Gulf-China VLCC route, a critical artery for energy trade, saw freight rates reach an all-time high of w143 on November 25, 2025, according to Platts assessments. While geopolitical disruptions in the Middle East have historically impacted shipping routes—such as blockades in the Strait of Hormuz—CMES Secretary Kong Kang emphasized that structural supply-demand imbalances, rather than regional volatility alone, are the primary drivers of the current upcycle. Factors including refining capacity constraints, Chinese crude import growth, and shifts in global trade patterns (e.g., reduced Russian crude flows) are reinforcing long-haul tanker demand.

Geopolitical tensions have introduced logistical challenges, including rerouted shipments bypassing the Suez Canal and increased transportation costs for European-bound cargo. However, CMES noted that these disruptions have not significantly derailed market fundamentals. The company highlighted that 41 new VLCC orders placed in late 2025 will not alleviate supply tightness until the second half of 2028, given limited global shipbuilding capacity and compliance constraints on aging vessels.

Kong also pointed to rising time-charter inquiries, with multiyear VLCC hire rates hitting a three-year high above $60,000/day, reflecting strong owner confidence in the market's three-year outlook. While Middle Eastern supply recovery and shifts in Chinese procurement strategies add complexity, CMES maintains that the impact of regional instability remains "controllable" within the broader context of structural demand growth and supply constraints.

As global crude oil shipments hit an eight-year high of 1.96 billion barrels by November 2025, CMES's outlook underscores the enduring importance of the Middle East in shaping VLCC market dynamics—albeit within a framework of manageable risks.