US lifts sanctions on one Cosco tanker unit

The US Treasury Department announced last Friday that it has deleted from its sanctions list Cosco Shipping Tanker (Dalian) Co, but continues to blacklist the unit Cosco Shipping Tanker (Dalian) Seaman & Ship Management.

The sanctions on the two Cosco Shipping units were placed on 25 September last year, a move that had sent tanker freight rates to record highs.

The partial lifting of the sanctions comes weeks after the US and China trade talks reached a ‘phase one’ deal under a truce signed on 15 January.

A US official reportedly said lifting sanctions on one of the Cosco Shipping subsidiary would allow the US President administration to retain leverage on China and Cosco to stop taking Iranian oil.

China is the world’s only major importer of Iranian oil, leading to the US sanctions which aim to limit Tehran’s nuclear programme despite Iran insisting that the programme is for peaceful purposes.

Freight rates for VLCCs had soared to touch $300,000 a day briefly in October when the sanctions were placed, before quickly retreating even though they remained considerably high at over $100,000 a day as recently as this month, according to data from the Baltic Exchange.

Before the lifting of the sanctions was announced, VLCC freight rates on the USGC-China route have already dropped 18% in the past week, according to Platts data. VLCC rates across main trade lanes have plunged 40% on average last week, according to the most recent EA Gibson report.

Related:Cosco Shipping units hit by US sanctions, tanker rates spike

Analyst EA Gibson added that tanker rates are expected to decline further with the re-emergence of Cosco Dalian ships.

Tanker rates have already been under pressure from growing global VLCC supply as the market adjusts to new operating landscape under IMO 2020 regulation.

Meanwhile, four other Chinese companies continue to remain on the sanctions list, namely China Concord Petroleum, Kunlun Holding, Kunlun Shipping, and Pegasus 88.