As Strait of Hormuz traffic collapses and Saudi crude is pushed the long way round the Cape of Good Hope, a five per cent lift in tonne-mile demand is doing the work that cargo growth no longer can. The question for owners is what remains of today’s VLCC earnings once the lanes reopen.
Why Yanbu Crude Now Sails 15,000 Miles to Reach Asia
The Strait of Hormuz has
effectively closed to routine tanker traffic. Clarksons Research reports
transit volumes running around 90% below pre-conflict levels, with daily
crossings down to roughly 13 vessels a day. What was the world’s busiest
oil artery is now a trickle.
The Bab el-Mandeb has
followed. VLCC transits through the southern Red Sea gateway have thinned to about
one a day, as owners refuse to expose high-value tonnage to Houthi missile
range. The NCC Ghazal strike on 28 July — a 50,000 dwt Saudi product tanker hit
and forced back to port — removed any remaining ambiguity about the threat.
The consequence is a
wholesale redrawing of the Gulf-to-Asia map. A cargo of Saudi crude lifted at
Yanbu for Asian discharge now runs roughly 15,000 nautical miles via the
Cape of Good Hope, against 6,700 nautical miles on the direct
routing — more than double the distance for the same barrels, on
Clarksons’ figures.
Fig.
1 — Yanbu–Asia crude voyage distance, direct via Hormuz versus rerouted via the
Cape.
The Tonne-Mile Mechanic Behind the VLCC Rally
A 5% Demand Lift From Distance, Not Cargo
Tonne-miles, not tonnes, set
tanker earnings. When half of Asia-bound Saudi crude reroutes round the Cape,
Clarksons estimates global tonne-mile demand rises by around 5% —
despite not a single extra barrel moving. Every rerouted cargo ties up a ship
for far longer, tightening effective supply.
The freight market has
responded exactly as the mechanic predicts. VLCC earnings jumped 13% in a
single week to about $145,000 a day, as charterers scrambled for tonnage
suddenly scarce in the water rather than at the wellhead. Longer voyages also
lift bunker consumption and dwell, draining fuel availability at key bunkering
hubs.
Fig.
2 — Strait of Hormuz daily transits, pre-conflict baseline versus current.
The barrels have not grown. The sea days have. That distinction
is the entire tanker rally — and it is why the rally is borrowed rather than
earned.
Why Containerships Keep Sailing While Tankers Turn Back
The tanker retreat is not
mirrored on the box side, and that divergence is the analytical crux.
Linerlytica tracked 54 containership transits through the Bab el-Mandeb in a
single week, with Maersk, CMA CGM and Wan Hai holding their renewed Suez
strings. Against roughly seven VLCC crossings over the same period, the
split is stark.
The economics explain it.
Box lines can price the risk into surcharges and reroute selectively, spreading
exposure across thousands of parcels. A tanker owner faces a war-risk
premium of 7.5% to 10% of hull value for a Hormuz call — as much as $10m
on a single VLCC voyage — which makes the direct routing simply uneconomic.
Fig.
3 — Bab el-Mandeb weekly transits: containerships holding versus VLCCs turning
back.
So the disruption is
absorbed through two different channels. The container trades absorb it in
surcharges and keep sailing; the crude trades absorb it in distance and turn
back. Both channels flatter their respective freight markets, and both are
masking how soft the underlying demand picture has become.
The Reversal Risk Owners Are Underpricing
Strip out the distance
premium and the demand signal is weak. A large cluster of Iranian crude — 24.4m
barrels, up 60% — is idling off eastern Malaysia, unwanted, as Chinese
teapot refiners run below 48% utilisation against a five-year norm
nearer 60%. The buyers are not there.
The box market tells the
same story from the other side. The SCFI has fallen for three consecutive
weeks, and the 2026 peak has effectively closed by end-July for a third
straight year — an early top that only chokepoint friction has kept from
looking worse. Schedule reliability, meanwhile, has slipped to 62.6%.
Today’s $145,000 a day is a disruption premium, not a structural
rate. Owners who extrapolate it into their 2027 planning are pricing a cushion
on loan from geopolitics.
The risk, then, is symmetry.
If Hormuz and the Bab el-Mandeb normalise, the tonne-mile lift evaporates in
weeks, and the soft demand beneath — compounded by the orderbook still
scheduled for delivery through 2027–28 — reasserts itself against a market with
nothing left to hide behind. Owners locked into elevated-cost voyages may also
find the current threat level falls short of the force-majeure bar under
standard BIMCO war-risk clauses, seeding charterparty disputes.
What Owners, Charterers and Planners Should Do Now
Owners should bank the rally
without extrapolating it. Treat $145,000 a day as a geopolitical premium with a
short half-life, and resist committing newbuild or sale-and-purchase decisions
to a rate that distance, not demand, is holding up.
Charterers should fix selective cover
on longer tenors while the market is distracted by spot volatility, and audit
their exposure to BIMCO war-risk and force-majeure clauses before a dispute
crystallises. The gap between commercial disruption and legal force majeure is
where the next round of losses will sit.
Trade planners should build the normalisation scenario into 2027–28 capacity models now. The tonne-mile cushion absorbing today’s fleet is borrowed, and when it is repaid the capacity wave arrives against demand that the disruption has been quietly concealing.
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