China is the world’s biggest crude importer and the largest buyer of Iranian oil. It imported about 12.4 million bpd of crude last year, with roughly half coming from the Middle East. Beijing has also been a reliable buyer of Iranian oil, accounting for 90 per cent of Iran’s sanctioned oil exports. Iranian crude flows have fallen sharply as the conflict has disrupted shipping through the twin chokepoints of the Strait of Hormuz and the Bab Al Mandeb.
Chinese imports of Iranian crude through the Strait of Hormuz averaged about 530,000 barrels a day in July and August, according to Kpler data. That is 48 per cent below pre-war levels and 72 per cent below the October 2024 peak, when it was importing close to 1.9 million bpd of Iranian crude.
Iranian oil has been an important source of cheaper crude for China, particularly for its smaller independent “teapot” refiners. These privately-owned plants have fewer supply options than the country’s state-owned oil majors. Cheap Iranian oil has proven particularly advantageous for them in maintaining healthy refining margins.
For much of the war, China was still able to import oil largely unhindered thanks to its status as a friendly country to Iran. However, the Strait of Hormuz, the main route for Middle Eastern oil to Asia, has become increasingly difficult to navigate following Iranian and US blockades.
China initially compensated by taking more crude through the Red Sea, as Saudi Arabia increased exports from its west coast terminals.
Chinese crude imports through the northern Suez Canal and the southern Bab Al Mandeb surged to 2.62 million bpd in April, up 228 per cent from their average over the previous 20 months, according to Kpler data. However, following the Houthi blockade of Saudi ships, imports fell to 940,000 bpd in July and were about 1.02 million bpd in August - 61 per cent below the April peak.
Some China-bound tankers are now loading at Sidi Kerir, the Mediterranean terminal for Egypt’s Sumed pipeline, while others are waiting outside the Strait of Hormuz for shuttle tankers to unload their cargoes.
These workarounds are expensive and are adding significantly to voyage times to Asia. A voyage to Asia that normally takes 25 to 27 days through Bab Al Mandeb can take about 50 days around the Cape of Good Hope. Freight costs on the Suez route are now about $10-$11 a barrel, more than twice the roughly $5 a barrel for shipments from Yanbu via Bab Al Mandeb before the Houthi attacks.
The latest set of US sanctions is likely to put further pressure on Beijing. Although Chinese banks have so far been spared, Washington has warned that countries continuing to do business with Iran could face secondary sanctions.
Beijing has rejected unilateral US sanctions and said it will take measures to protect its strategic energy interests. China also has a substantial buffer, with an estimated 1 billion to 1.4 billion barrels of oil inventories, giving it time to absorb delayed cargoes and higher shipping costs.
