Despite the surge in tanker orders since the second half of 2022, the demand for additional newbuildings remains critical as the ageing fleet continues to challenge the renewal process. However, shipyard capacity is currently under significant strain

According to a recent report by MB Shipbrokers, the orderbook for both crude and product tankers has expanded considerably, with deliveries expected to boost market supply through 2028. Yet this growth is largely counterbalanced by the ageing fleet, with many vessels projected to exceed 15 and 20 years of age by December 2027.

As of August 2024, modern VLCCs between 0 and 5 years old make up 18% of the fleet, while vintage vessels aged 15-20 years constitute another 18%, and those over 25 years old represent just 1% of the active fleet. MB Shipbrokers predicts that by December 2027, the proportion of young VLCCs will drop to 9%, while older vessels will increase to 28% and 8%, respectively.

A similar pattern is evident in the Suezmax and Aframax/LR2 segments. Older Suezmaxes, aged 20-25 years, are expected to increase from 15% to 17% over the next three years, with the share of even older vessels aged 25+ years rising from 2% to 9%. In the Aframax category, the share of older vessels is projected to surge from 14% to 20% and from 2% to 6%, respectively. However, it’s noteworthy that the share of younger tonnage (0-5 years old) will see a slight uptick in both segments.

A shortage of younger vessels is also anticipated in the MR2 sector. By December 2027, the share of tankers between 0 and 5 years of age is expected to decrease from 17% to 16%, and those within the 5-10 age group from 23% to 18%. Conversely, older tankers above 20 years of age are projected to represent 22% of the fleet in three years, up from the current 12%.

Tricky shipyard conditions

The need for newbuildings coincides with a challenging situation in the shipbuilding industry. According to MB Shipbrokers, the delivery time for crude tanker tonnage has increased from an average of two years during 2016-2022 to three years in 2024.

“The availability of larger crude tanker berths has dropped significantly compared to the last quarter, as major shipyards are competing for various projects, including container vessels and LNG carriers,” MB Shipbrokers highlights.

In the product tanker sector, analysts note yard capacity for smaller vessels is still available from early 2027. However, they add, “The number of vessels surpassing 15 and 20 years of age continues to grow, even if the 2027 slots are filled with product carrier orders.”

The analysis concludes that several factors point to a prolonged period of tight shipbuilding capacity, particularly in China and South Korea.

The ordering/demolition balance

Data from Greek shipbroker Xclusiv Shipbrokers indicates that approximately 356 tankers have been ordered globally from January to July this year. This surge in newbuildings has driven the orderbook-to-fleet ratio into double digits within the Aframax/LR2 (18.2%), MR2 (15.4%), and Suezmax (15.2%) sectors, in terms of deadweight tonnage. Overall, newbuildings account for about 11.8% of the total active tanker fleet.

On the other hand, demolition activity remains subdued. Sanctions against Russia and high demand for vintage tankers in the ’grey’ trade have been significant factors contributing to this trend, according to Xclusiv Shipbrokers. Analysts recall that 13.6M dwt was scrapped in 2021, a year marked by the Covid-19 pandemic, which suppressed oil demand and freight rates. However, from 2022 to the present (August 2024) - amid the Russian invasion of Ukraine and the Red Sea crisis - only 6.2M dwt has been demolished.

Xclusiv Shipbrokers also reports the average age of the tanker fleet is now 13 years, nearly a year older than it was two years ago. Within this fleet, the number of vessels aged 20 years or older has surged by 70% compared with two years ago, reaching a total of 1,397 vessels.

Source: Riviera

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	Issue 92 of Robban Assafina (July/Aug. 2024)