The global tanker market is going through an unprecedented freight rate storm.
The conflict in Iran has reshaped the Middle East crude oil trade landscape, and combined with a severe shortage of fleet supply, Very Large Crude Carrier (VLCC) freight rates have surged to their highest level in sixty years 鈥?the cost of shipping a cargo of crude oil from the United States to China has reached as high as $80 million, exceeding the launch cost of a SpaceX Falcon 9 rocket.
According to a Bloomberg report dated October 9, a tanker order departing from the United States this week carried a freight cost equivalent to $41 per barrel, compared with an average of just $4.50 on the same route last year.
This cost accounts for roughly 45% of the West Texas Intermediate crude futures price.
Shipbroker Gibson pointed out that the cost of this voyage is approximately $80 million, higher than the standard launch price of about $74 million for a SpaceX Falcon 9; the same amount of money earlier this year would have been enough to directly purchase a comparable tanker.
Shipbroker SSY stated that even after adjusting for inflation, current freight rates are the highest since the introduction of supertankers in the 1960s, surpassing the "Tanker War" period during the Iran-Iraq War of the 1980s.
At the same time, the surge in freight rates is being transmitted throughout the entire energy industry chain.
European refiner Repsol reported a third-quarter refining margin of $36 per barrel, but according to RBC analyst estimates, this had narrowed to about $15 in October, partly due to elevated tanker costs.
Russell Hardy, CEO of Vitol Group, the world's largest independent oil trading house, said at a conference this week, "There really isn't enough capacity in the market, and we are seeing an almost parabolic price movement."
Supply Gap: The Chain Reaction from the Strait of Hormuz
The root cause of this round of freight rate surges is a structural capacity shortage triggered by the Iran war.
After the outbreak of the Iran war, the transit risk through the Strait of Hormuz rose sharply, prompting a large number of shipowners to choose alternative routes, significantly compressing global effective capacity.
As Middle East crude oil exports gradually recover, industry executives estimate that oil transit through the Strait of Hormuz has now rebounded to about 80% of pre-war levels, but the trade process is far more complex than before the war.
Middle Eastern oil-producing countries are increasingly relying on "ship-to-ship" transfers at sea, with each transfer typically adding about a week of voyage time, further extending the turnover cycle of the global fleet.
Repeated disruptions to trade flows have exacerbated this predicament.
The Hormuz passage was once at a standstill, with large numbers of tankers sailing empty between the Middle East and other regions in search of cargo; now, as Gulf shipping recovers, vessels need to be redeployed, a process that often takes weeks.
Meanwhile, Iran's crude oil exports to China have effectively been interrupted, forcing Chinese buyers to turn to other sources and driving up tanker demand in mainstream markets.
In addition, Iranian attacks on commercial vessels have forced some ships to suspend operations for repairs, while others have diverted around Africa to avoid Houthi threats, adding thousands of extra miles to their voyages.
Lauren Gallinari, head of commercial intelligence at shipbroker MJLF & Associates, said, "We have indeed seen extreme freight markets before, but the speed, magnitude, and breadth of this rally are remarkable."
Freight Numbers: Per-Barrel Shipping Cost Approaches Half the Price of Crude
The absolute level of freight rates has reached a point where the market struggles to price them.
According to Bloomberg data, the cost of chartering a VLCC to ship US crude to Asia has risen to $77 million, compared with a full-year 2025 average of just $9.2 million.
Vitol's Hardy said freight rate volatility has become so extreme that traders find it difficult to estimate shipping costs even within a margin of a few dollars.
Clarksons Securities analysts wrote, "With virtually no additional capacity available, freight rates increasingly depend on the upper limit that charterers can bear."
The impact of this rally extends far beyond VLCCs.
Daily earnings for Suezmax tankers have jumped to more than $680,000, roughly five times the level at the beginning of this month; freight rates for vessels carrying gases such as propane are near historic records, having more than tripled since the end of last year.
The shipping composite index also confirms the breadth of this rally.
According to Clarksons data, the ClarkSea Index set a historic high for four consecutive weeks as of October 2, reaching $75,658 per day, a monthly gain of 73%, with the year-to-date average up 66% year-on-year and 84% above the 10-year average.
It is worth noting that this rally is not driven by tankers alone 鈥?multiple sub-markets including LNG carriers, dry bulk vessels, container ships, and car carriers are simultaneously at "abnormal or strong" levels.
Downstream Transmission: Refining Margins Under Pressure, Inflation Risks Rising
The freight rate surge is accelerating its transmission from the midstream to the downstream, with refiner profit margins being rapidly eroded.
Shell said in a trading update this week that some third-quarter results will be affected by "higher variable costs on long-term shipping charters in the current macroeconomic environment," echoing similar disclosures by the company earlier this year.
Tor Svelland, founder of hedge fund Svelland Capital, warned, "The market is climbing steadily, but at some tipping point, refineries will easily choose to cut production. When transportation costs rise from 5% of cargo value to 50%, trade flows will stop."
At the political level, the Trump administration faces an urgent need to suppress inflation ahead of the midterm elections, with rising diesel prices hitting the industrial and agricultural sectors; the US oil industry has already pressured the government to push relevant parties to expand diesel exports to ease the global shortage.
Morrow also said he believes China will gradually increase refined product exports, describing it as a "key hub" for resolving the global refining shortage.
At present, the core question in the market has shifted from "how much higher can freight rates go" to: how much pressure can the global crude oil trading system withstand before continuously rising freight rates erode refining profits?
Asset Revaluation: Secondhand Ship Prices Rarely Surpass Newbuild Prices
The freight rate surge is reshaping the valuation logic of the entire shipping asset market.
According to Clarkson Research Services data, secondhand tanker market prices have climbed to a historic record of $240 million per vessel, more than 60% higher than at the end of last year.
According to shipbroker Clarksons data, the average price of a 15-year-old VLCC is about $160 million, up 44% from three months ago and already higher than the $131 million newbuild price 鈥?a phenomenon of secondhand ship prices exceeding newbuild prices that is extremely rare in the industry.
Meanwhile, the monthly salary for captains willing to navigate through the Strait of Hormuz has reached as high as $100,000, and daily charter rates for supertankers on Middle East routes once touched a historic high of $1.3 million.
The combined market capitalization of the world's largest listed shipping companies has surpassed $70 billion, setting a historic record.
Middle Eastern oil-producing countries including Iraq, the UAE, and Kuwait have recently entered the market to purchase tankers, seeking to lock in capacity and hedge against price volatility.
Cargo owners in West Africa and South America have begun splitting cargoes originally carried by VLCCs into two smaller Suezmax vessels to cope with the capacity crunch.
Comments