Supertanker shortage! Global oil shipping costs 'never been this high,' 'biggest gamble in maritime history' pays off big.

Title context: Supertanker shortage! Global oil shipping costs 'never been this high,' 'biggest gamble in maritime history' pays off big. Text: The global supertanker market is experiencing unprecedented supply-demand tightness, and soaring freight rates are rendering some long-haul crude oil trades economically unviable, profoundly reshaping the global energy flow landscape. The two simultaneous wars between Russia-Ukraine and the Middle East are dealing a synchronized blow to the global refining system, pushing global diesel profit margins to a record high in August, with the average U.S. diesel price rising to $6.45 this week, a record high. Today, shipping a cargo of crude oil from Houston to Asia costs about $26 per barrel, or $52 million per vessel, accounting for roughly a quarter of the WTI crude oil futures price. Saad Rahim, Chief Economist of Trafigura Group, one of the world's largest commodity traders, said bluntly at the Bloomberg Commodity Investors Forum: the cost of moving crude oil around the world has never been this high. Traders' concern is that elevated freight rates are pushing the profit margins of some refiners who process long-haul imported crude into fuel close to zero, even as demand for diesel and gasoline remains strong. High freight rates are forcing global refiners to abandon distant sources and scramble for near-end supplies. Capacity tightness has spread from very large crude carriers to small and medium-sized vessels, driving up freight rates across all vessel classes. Meanwhile, tanker owners are reaping windfall profits, with the valuation of the world's largest tanker stocks surging to a record nearly $70 billion this week. Against this backdrop, a South Korean shipping tycoon's early bet of more than $7 billion is becoming the biggest beneficiary of this freight rate surge. Record Freight Rates, Tanker Owners Reap Windfall Profits This round of soaring freight rates is creating enormous wealth for a handful of shipowners who dominate the tanker market. On the industry's core benchmark route, the daily earnings of Very Large Crude Carriers (VLCCs) carrying 2 million barrels of crude from the Persian Gulf to China have surpassed $1.2 million. Saad Rahim, Chief Economist of commodity trading giant Trafigura Group, noted that as freight rates account for a sharply rising share of the total value of cargo, "once you look at it from a logistics perspective, this becomes a much more serious problem." Several shipbrokers with decades of experience said they have never seen such scarcity in the number of available supertankers, and multiple industry executives also said they had never experienced a similar market. They noted that within certain time windows, there are almost no supertankers available for charter in some regions. Capacity tightness has trickled down to small and medium-sized vessel classes, with Suezmax tankers' average daily earnings exceeding $300,000, a level typically seen only on routes near war zones. Asian refiners have begun using Aframax tankers with a capacity of 700,000 barrels to replace supertankers for carrying U.S. crude, and cargoes along the Atlantic China Welding Consumables,Inc. coast (including Brazil) are also being split between two Suezmax vessels instead of the original single VLCC. Xavier Tang, Senior Market Analyst at analytics firm Vortexa, pointed out: freight rates have never accounted for such a large proportion of the landed cost of crude oil, but now their role in the oil market has greatly increased, and this is having a cascading impact on end buyers. Long-Haul Routes Lose Appeal, Buyers Scramble for Short-Haul Supplies Elevated freight rates are causing long-haul routes that were originally of strategic importance to lose economic value. According to Vortexa ship tracking data, U.S.-to-Asia cargo volumes have fallen significantly in recent weeks alongside the roughly threefold increase in freight rates. According to reports citing people familiar with the matter, a Japanese refiner recently purchased Alaskan crude from Exxon Mobil that is typically not well suited to its processing equipment, mainly because of the shorter voyage. The competition for supply in the European market is equally fierce. With Brent futures once approaching $110 per barrel this week, the European physical Dated Brent spot price has climbed above $131, reflecting buyers' urgent demand for short-haul cargoes. Saudi Arabia's suspension of next month's contractual cargo supplies to European buyers has further intensified local refiners' sourcing pressure. In more distant markets, sales of Angolan crude, which normally reaches China via long-haul voyages of thousands of miles, have also stalled. Sumit Ritolia, Senior Modeling Manager at analytics firm Kpler, said: current freight rate levels may be self-correcting in the long run, and will ultimately close the arbitrage window and reduce demand for the most expensive long-haul crude. Two Major DRIVEs: War Shock and the Korean Tycoon's Bet of the Century There are two core forces behind the freight rate surge. The first is the chain reaction from the U.S.-Iran conflict. Tankers transferring cargo near the Strait of Hormuz are occupying more vessels and more time, a large number of tankers are detouring around Africa to the Mediterranean to pick up cargo, and Asian buyers are also filling the Middle East gap with alternative supply from the Americas. Together, these factors have lengthened the effective voyage distance of global tankers and pushed up overall freight rates. The second is a stunning move by a low-profile Korean businessman. As mentioned by Wallstreetcn, before the U.S. and Israel launched attacks on Iran, South Korean shipping tycoon Ga-Hyun Chung had quietly spent about $7 billion to build the world's largest owned tanker fleet, a bet that ranks among the largest single-market wagers in maritime history. Chung's family business Sinokor was founded by his father in 1989, initially engaged in China-Korea container shipping. According to Eirini Diamantara of Greek brokerage Xclusiv Shipbrokers, Sinokor currently owns more than 160 tankers, nearly half of which are VLCCs. According to Kpler data, before the conflict broke out, Chung had pre-positioned VLCCs near the Strait of Hormuz, chartering them out as floating storage facilities in the early days of the war, with some vessels subsequently engaged in short-haul transfers, lightering crude to ports outside the Gulf before other vessels carried it to Asia. In addition, Sinokor's derivatives trading team simultaneously traded paper contracts linked to the freight market, further profiting from the upward movement in freight rates. The Logic of the Big Bet and Historical Risks Industry insiders believe the core logic behind Chung's positioning is that a single player, if controlling a sufficiently large fleet, can influence freight rate levels by controlling capacity supply. The real-world conditions supporting this logic include: major shipowners in Greece, Northern Europe, and Asia have not formed market dominance; a large number of tankers have flowed into the "shadow fleet" transporting sanctioned crude, continuously shrinking mainstream available capacity; and the opaque secondhand vessel market makes it difficult for regulators to track and intervene. Initially, industry veterans were shocked by the bet but not worried, and were even happy to sell vessels to this "industry upstart," believing that the cyclical fluctuations of the tanker market would sooner or later make him pay the price. History does offer warnings. In the 2000s, Taiwanese tycoon Nobu Su made substantial profits by controlling a large number of bulk carriers, then tried to replicate the same strategy in the tanker market, only to fail in the 2008 global economic crisis. For now, Chung's gamble is working, but whether tanker freight rates can remain at such high levels still depends on the trajectory of the war, the speed at which the global energy trade landscape adjusts, and the eventual rebalancing of market supply and demand. This article is reprinted from "Wallstreetcn," author: Bao Yilong; GMTEight editor: Yan Wencai.