VLCC sector turmoil: Russia only a short-term disruption, South Korea’s Sinokor controls 25% market share and holds pricing power

VLCC sector turmoil: Russia only a short-term disruption, South Korea’s Sinokor controls 25% market share and holds pricing power

I. What happened? Massive shock in the oil shipping sector

1. Coordinated surge in the global oil shipping sector since the beginning of the year:

On February 12, 2026, China's A-share market leaders COSCO Shipping Energy and China Merchants Energy Shipping both hit their upper limit at the opening. Recently, US-listed DHT Holdings (DHT.N) and Frontline Shipping (FRO.N) have seen their stock prices climb almost synchronously at a 45-degree angle. As of the close on February 12, all four listed oil shipping companies' YTD gains exceeded 30%, with COSCO Shipping Energy up 60%, making it the sector leader.

However, affected by speculation that Russia is considering returning to the dollar system, the oil shipping sector plunged on February 13, with COSCO Shipping Energy nearly hitting its lower limit in early trading.

2. VLCC spot market continues to rise:

The sharp rise in the oil shipping sector is backed by strong spot market data. According to the latest data from Clarkson and the Baltic Exchange:

VLCC-TCE weighted average: soared to $116,000/day, up 31.99% week-on-week.

TD3C main route (Middle East → China): closed at $127,000/day. Notably, in early January this route briefly dropped to $34,000, and then in less than 30 days achieved a doubling and then doubling again.

Forward Freight Agreements (FFA): Q1 average has locked in above $100,000, Q2 forward prices conservatively stand at $80,000, completely breaking the historical rule that “freight rates always fall during the Spring Festival off-season.”

II. Why is it important? The logic of the “king of the cycle” is strengthened

If we were still discussing “whether the cycle is returning” at the end of January (see January analysis article), now the core concern has shifted to “how high can the cycle go, and how long can it last.”

1. The “end” of the shadow fleet: from physical punishment to ecological strangulation

Recently, Western countries’ clampdown on the “shadow fleet” has entered a second stage of acceleration.

US-Europe joint crackdown: The Trump administration’s “Southern Spear” operation continues its high-pressure physical seizure policy. On February 6, the EU announced its 20th round of sanctions against Russia, planned to pass before the 4th anniversary of the Russia-Ukraine conflict (February 24). The package will ban EU companies from providing insurance, finance, shipping agency, or technical services to any ship that transports Russian crude oil in violation of sanctions—this means a full maritime services ban is being initiated. Additionally, 43 oil tankers were added to the blacklist in this round, effectively implementing a near 100% embargo for Russian oil transport.

Significance: By early 2026, sanctioned crude oil tanker capacity accounts for about 19%-20% of global capacity. This is essentially a “targeted explosion” against 200 million DWT of substandard capacity worldwide. These vessels, lacking insurance, classification certification, or port access, cannot return to compliant markets. Once they lose loads from Russia, Iran, or Venezuela, they can only idle or be dismantled, and the roughly 16% of global volume they used to carry will be forced back to the compliant market, with average voyage distances (ton-miles) significantly extended. For example, India imports crude from the US instead of Russia, and China imports from West Africa/Brazil instead of Iran.

2. “Hammered” by DHT earnings conference: Is Korean syndicate close to absolute pricing power?

The DHT earnings call on February 5, 2026 was highly informative, almost an official testimony of a fundamental shift in industry structure:

  • Scale exposure: DHT confirmed that Korean syndicate Sinokor and its partners now control around 120 compliant VLCCs. This means this single interest group dominates about 25% of the global spot market.
  • Price-setting “monopolization”: Previously VLCCs were fragmented players, now it’s “organized supply”. As voyage distances lengthen, ships spend more time at sea, making fewer “spot chips” available to charterers. Sinokor and other syndicates only need to lock up critical compliant vessels to use this “time gap” from longer sea time to completely control pricing power. With Sinokor controlling 1/4 of spot chips, they have the ability to push freight rates above previous ceilings.
  • Unprecedented aging peak: DHT expects that by end-2026, 46% of global VLCCs will be over 15 years old, and 20% over 20 years old. Although there are recent new ship orders, delivery slots are scheduled through 2029, and current orders are far from adequate to replace the old fleet soon reaching the 20-year mandatory retirement threshold.
  • Time charter price anchoring effect: DHT stated recent 1-year time charters have risen to $85,000/day, up 10% from Sinokor’s “passionate order” with Frontline in January. This indicates charterers (major refineries and oil majors) have reached consensus in fear: to ensure supply chain security, they are willing to pay shipowners an extra pure profit premium of about $55,000/day.

3. DHT’s “beta strategy”: confidence vote by core industry players

DHT stated they will “sell old, buy new” and “increase spot holdings” for 2026, which is highly indicative. As a conservative shipowner, DHT expects its spot proportion to reach 3/4 of its fleet in Q2 2026. This embrace of beta shows industry top players judge current high freight rates are not a short-term spike, but a long-term trend supported by “ton-mile multiplier effects.”

III. What’s next? — Focus on Russia-Iran developments

1. Russia returning to the dollar system? Watch for substance

Recently, an internal Kremlin memo circulated saying Russia is considering returning to the dollar settlement system as a bargaining chip for broad economic partnership and a peace deal with the Trump administration on Ukraine. Affected by this news, COSCO Shipping Energy and China Merchants Energy Shipping shares plunged over 7% on February 13. The market fears that if Russia returns to the dollar system, it could mean de-dollarization reversal or a sudden collapse of global sanctions regimes.

With geopolitics deeply embedded in trade mechanisms, sanctions have become a systemic tool to reshape market behavior. Negotiation signals (sentiment) can affect share prices, but only the lifting of sanctions (substance) will change freight rate models.

2. How Iran developments impact oil shipping prices:

The Iran factor has evolved from a simple “geopolitical risk premium” to a key variable of “market structure reshaping”. Whether sanctions intensify, military conflict erupts, or sanctions are lifted, under current rigid supply constraints, most outcomes point to increased demand for compliant shipping and higher central freight rates—a strong asymmetric positive.

The market’s traditional views on the Iran issue often focus on “supply disruption” concerns, but based on current industry structure, the core logic should shift to “Black-to-White” capacity replacement logic.

Current anchor: Iran’s average daily crude oil shipping exports are about 1.6 - 1.7 million barrels, around 4.1% of global seaborne crude oil trade. Most of this trade is currently carried by the “shadow fleet”, involving about 100 VLCCs (very large crude carriers).

Marginal change: As the US (especially under the Trump administration) intensifies enforcement of Iran sanctions, as well as potential regime change or negotiation expectations, the previous gray trade chain is collapsing.

Reasoning conclusion: Once Iranian crude returns to the compliant market (or buyers shift to compliant sources due to sanctions), volumes previously carried by the shadow fleet move to compliant vessels. As the shadow fleet is mostly over 20 years old and cannot pass strict regulatory standards, effective supply will shrink sharply.

Risk Warning and DisclaimerThe market carries risks, investments require caution. This article does not constitute individual investment advice and does not consider the specific investment goals, financial circumstances, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest at your own risk.