(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here.
China plans to ask the U.S. to lift sanctions on its biggest shipping company at high-level trade negotiations in Washington this week, people familiar with the matter said.
Officials plan to raise the issue of penalties against the Dalian units of China COSCO Shipping Corp., which the U.S. accuses of knowingly violating restrictions on carrying Iranian petroleum, said the people, who asked not to be identified discussing a private matter. Four other Chinese entities were also sanctioned last month along with COSCO. The people did not say if the Chinese delegation planned to seek relief for those companies.
The U.S. decision to impose sanctions on Chinese shipowners including COSCO Shipping Energy Transportation Co. prompted a bidding war as charterers scrambled to replace vessels owned by targeted companies. It sent costs for ships with oil-carry capacities ranging from 650,000 to 2 million barrels to a 2019-high, while supertanker day rates for the Middle East to China route surged to its highest in probably 11 years.
The penalties against the Chinese companies bar U.S. citizens and entities from dealing with the firms, effectively blocking them from American banks at the heart of the global financial system. China's National Development and Reform Commission and Ministry of Commerce didn't immediately respond to faxes seeking comment on the request. China COSCO Shipping did not respond to an email and fax.
Oil Margins, Crude Flows Are Collateral Damage in U.S. Sanctions
President Donald Trump said the first day of high-level negotiations between the U.S. and China went "very well" on Thursday, and that he plans to meet with the top Chinese negotiator Friday. It's the first senior-level in-person talks since late July as both sides try to end an 18-month trade war that is taking a toll on the global economy and U.S. manufacturing. People familiar said separately the U.S. is seeking to include a previously-agreed currency pact as part of a preliminary deal.
While the sanctions specifically targeted COSCO's Dalian subsidiary, charterers indiscriminately shunned all tankers owned by its parent company and other units for fear of running afoul of the rules. This week, however, some oil traders once again started booking tankers operated by COSCO, although the charters are not expected to immediately bring calm to markets.
(Updates with U.S.-China trade talks progress in 5th paragraph.)
--With assistance from Sharon Cho.
To contact Bloomberg News staff for this story: Sarah Chen in Beijing at email@example.com;Steven Yang in Beijing at firstname.lastname@example.org;Alfred Cang in Singapore at email@example.com
To contact the editors responsible for this story: Serene Cheong at firstname.lastname@example.org, Sharon Chen, Alexander Kwiatkowski
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.