Chinese shipping firms are making huge profits transporting Iranian petrochemicals after EU sanctions against OPEC's second largest oil producer decimated the competition, ship brokers said on Friday.

EU sanctions prohibiting European insurers and reinsurers from covering tankers carrying Iranian petrochemicals came into effect on May 1, forcing out most of the ships operating in this niche market.

China's insurance firms do not have to abide by the sanctions, and they have the capacity to cover the vessels bringing supplies to the world's second biggest oil consumer and its second largest economy.

China is Iran's biggest petrochemicals customer, buying 22 percent of its total exports, which Tehran media said were worth $14 billion in the year ending March 20.

"China seems to be the only one willing and able to do this since they can get Chinese insurers to cover them," said a Singapore-based ship broker who, like others in the industry, declined to be identified because he was not authorised to speak to the media.

Half of Iran's petrochemical exports go to Asia, and the impact of the EU sanctions offers a glimpse into how Iran's much larger crude and oil products trade could be affected once similar European measures are imposed in July.

Around 90 percent of the world's tanker insurance is based in the West, so the sanctions threaten crude shipments to Iran's top Asian buyers China, India, Japan and South Korea.

Several ship brokers said Chinese firms Sinochem Corp and Nanjing Tankers were the most active in the Iranian petrochemical trade, charging twice as much than usual for shipments. A spokesman for Nanjing Tankers declined to comment, while Sinochem officials were not immediately available.

"It is mostly Chinese vessels from Sinochem and Nanjing Tankers that are taking a chance. The money is good and they have the tonnage," one of the brokers said.

Oil trader Sinochem typically imports between 20,000 and 30,000 tonnes of Iranian petrochemicals a month. An industry official said the sanctions had affected about half of Sinochem's petrochemical business with Iran.

The EU sanctions have created a two-tier petrochemical market, with large premiums available to ship owners able to find replacement insurance to transport Iranian products such as methanol, xylene and caustic soda.

Ship owners in the petrochemical trade between Iran and China are asking as much as $100 a tonne for use of a 10,000-tonne tanker, double the rate from a month ago, traders said. Similar increases in freight rates were reported between Iran and India, its second biggest oil and petrochemicals buyer.

"A lot of ships are owned by Western companies, and that will restrict the movement of some vessels but not all," said Mazlan Razak of consulting firm Nexant Inc.

Petrochemicals are typically transported on the smallest tankers with a deadweight tonnage of between 10,000 and 20,000, and require much less shipping insurance than the 300,000-tonne supertankers that dominate the Iran-China crude oil trade.

A typical chemical tanker would require less than $5 million in liability insurance to operate, while a very large crude carrier (VLCC) needs at least $150 million, according to industry sources and Reuters calculations.

The difficulty ship owners face in obtaining sufficient insurance to cover VLCCs due to the sanctions has prompted Beijing to consider offering tankers sovereign guarantees.