China Navy Drills Force Cargo Ships To Steer Clear Of Taiwan

By Kevin Varley (Bloomberg) Shippers rerouted vessels as China began its most provocative military drills in decades around Taiwan, with at least one owner barring ships from transiting the strait. 

Taiwan said China fired 11 missiles in waters around the island as of 4 p.m. local time Thursday. The maneuvers, in response to US House Speaker Nancy Pelosi’s visit to the island this week, are taking place in six areas surrounding Taiwan, and China advised ships and aircraft not to go near the regions.

A statement by the Eastern Theater Command of the People’s Liberation Army said it had completed live-fire training and lifted relevant air and sea controls. It didn’t clarify whether that meant all exercises had ended, but the state-run People’s Daily later said controls off the eastern coast of Taiwan have been lifted. The drills began at noon on Thursday and were set to last until Sunday.

Ships continued to travel through the Taiwan Strait on Thursday, according to data compiled by Bloomberg. While the data showed approximately 15 vessels in the drill zones at noon, those may have moved out of the impact areas before exercises began. There were no ships in the zone closest to the China mainland in the Taiwan Strait or to the east of the island.

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It’s an evolving situation and at least one of the shipowners has barred vessels from transiting the Taiwan Strait, according to Anoop Singh, head of tanker research at Braemar. 

Some vessels are being rerouted around the eastern side of the island, which will create delays of as much as three days, shipbrokers estimate. Delays of that duration aren’t uncommon, and the long-term impact may be minimal if tensions ease next week. 

However, the risks for ships traveling through Chinese waters may be compounded by bad weather, threatening further delays. Shenzhen city, which hosts the Yantian container port and lies directly west of Taiwan’s southern tip, issued a tropical cyclone warning, citing a low-pressure system about 117 kilometers (73 miles) away as of Thursday morning.

Ships are also being diverted to Chinese seas, and the Taiwan Strait hasn’t yet been designated a war risk zone for insurance purposes, said a trader and an insurance broker.

The Taiwan Strait is a key route, with almost half of the global container fleet passing through the waterway this year. The disruption is just the latest inconvenience for supply chains, which have been reeling since the start of the pandemic and Russia’s invasion of Ukraine.

At least three liquefied natural gas tankers around Taiwan changed course to avoid military drills, according to ship-tracking data compiled by Bloomberg. Several others are reducing speed to avoid the maneuvers, which will result in small delivery delays to Taiwan and nearby destinations, traders said.

Some agricultural container cargoes from Southeast Asia to China have been postponed to load next week to avoid the risks, while some couldn’t be rescheduled and are still waiting for shipping companies’ notices, according to a Shanghai-based commodity trader.

Taiwan’s Maritime Port Bureau issued a notice warning ships to avoid the areas where drills are taking place as there is no fixed route for sea transportation, according to Taiwan’s transportation minister Wang Kwo-tsai.

Taiwan’s Formosa Petrochemical Corp. said Thursday morning there are currently no delays or postponements of cargoes heading to or leaving Mailiao port. CPC Corp., which has a refinery in Kaohsiung, located close to one of the drill zones, said its port operations remain unaffected.

“We’re very careful and asking port and ship agents to be cautious, and to not go into the drill zones,” said FPCC spokesman Lin Keh-Yen. 

By Kevin Varley, Stephen Stapczynski, Ann Koh and Sharon Cho with assistance from Elizabeth Low, Winnie Zhu and Cindy Wang. © 2022 Bloomberg L.P.

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