Asian Refiners Hedge Oil Surge, Cut Shipping Costs With Small Tankers

In recent years, the global oil shipping market has been shaped by the interplay of post-pandemic demand recovery, supply constraints, and geopolitical factors, pushing maritime freight rates to near historical highs. In the first half of 2024, tanker freight rates on certain routes surpassed the $10-per-ton threshold, significantly exceeding the previous year’s average. These elevated transportation costs have imposed a heavy burden on refiners in crude oil-importing countries, particularly in Asian markets that rely heavily on imported feedstocks.

Asian refiners, especially those in Taiwan, Hong Kong, and South Korea, face raw material costs that account for more than one-third of their total expenses. As freight rates surge, overall profit margins are rapidly squeezed. To maintain market competitiveness, the industry has begun seeking strategies to reduce transportation expenses. These measures extend beyond mere cost reduction, also influencing supply chain flexibility and risk management.

According to a report by Reuters, key measures adopted by Asian refiners include: (1) utilizing smaller tankers, which have lower operating costs and can access narrower ports; (2) entering into long-term vessel leases to lock in lower rental rates through long-term contracts; and (3) purchasing Middle Eastern crude oil on a delivered basis to transfer freight risk to suppliers. These practices can reduce transportation costs by approximately 10–15% in the short term and enhance the predictability of feedstock supply.