So far in 2024, the tanker industry has been witnessing unprecedented activity across all key areas of fleet development - orders, deliveries, and scrapping. For the second consecutive year, ordering activity has reached its highest levels, while new ship deliveries and demolition rates have notably decreased. As we wrap up the third quarter of 2024, let’s take a closer look at the latest tanker fleet statistics, revealing the significant trends and shifts in the market.
Ordering Activity and Fleet Growth
Recent ordering activity has recorded high levels in 2023 and especially so far in 2024. In fact, the total of 41.2m MT of deadweight contracted in 2024 (counting vessels larger than 10K MT of deadweight) is the highest level since 2006. The 30m MT of deadweight contracted in Q1-Q3 of 2023 was the highest since 2015. These numbers are excluding pure Chemical Tankers. The 16.7m MT of deadweight contracted year-to-date in the Product Tanker sector is also the highest since 2006, while the 24.4m MT of deadweight contracted in the Crude Oil Tanker sector is a record level since 2008. Most of the vessels will be delivered after 2025 and we expect a stable global fleet renewal rate. Greek owners hold near 30% of the new orders year-to-date, followed by Chinese owners with 13%.
Underscoring the strength of the Tanker market is the Orderbook-to-Active-Ships ratio, which currently stands at 13.5%. This ratio is a key indicator of the market’s future trajectory, as it reflects the number of vessels on order relative to the number of active vessels. A ratio of 13.5% suggests there will a healthy flow of new Tankers set to enter the market, supporting future capacity expansion.
Among the different tanker segments, Aframax/LR2 vessels are leading the charge with an impressive Orderbook-to-Active-Ships ratio of 18.6%. This figure points to strong future growth potential for this size class, as a significant number of these Tankers are poised to join the global fleet in the coming years. One of the main reasons for increased orders for coated Aframax/LR2 is their flexibility and the fact that they can handle both clean and dirty cargoes. This, along with the fact that they are easier to operate compared to MR, makes them also the preferred choice for most of the new companies entering the market.
The Medium Range 2 (MR2) segment also shows considerable promise, boasting an Orderbook-to-Active-Ships ratio of 17.8%. This segment has been particularly active in terms of new orders, with 140 vessels ordered year-to-date, making it one of the most dynamic areas of fleet expansion. On the other hand, the Medium Range 1 (MR1) segment, which covers vessels in the 34,000-41,000 MT of deadweight range, has seen comparatively slower growth. With an Orderbook-to-Active-Ships ratio of just 5%, the MR1 segment stands out as the least active in terms of new orders, indicating a more stagnant outlook for this class of tankers.
In summary, the global tanker fleet is on the cusp of significant growth, with various segments contributing to different degrees. While the Product Tanker market is gearing up for a rapid influx of new vessels, the Crude Oil Tanker segment is expanding more steadily. However, the spotlight is on the Suezmax and Aframax classes, which are expected to drive much of the fleet growth in the next two years. The healthy Orderbook-to-Active-Ships ratio, particularly in the Aframax/LR2 and MR2 segments, further suggests that the market is well positioned for future expansion.
Ship Deliveries
At the end of Q3, 2024 is shaping up to be a record year not only for the number of orders and contracting activities, but also for the expected deliveries of new ships. Total delivered deadweight of all vessels, excluding pure Chemical Tankers, this year is expected to be the lowest in over two decades. However, 2025 and 2026 will bring recovery and expansion of the global Tanker fleet. Almost half of the existing Tanker fleet is aged at least 15 years or older. The share of Tankers older than 20 years is 18%. Major charterers tend not to accept Tankers over 15 years of age, but some may have to review this position as the fleet has been steadily aging in recent years. More than 73% of the current deadweight on order will be delivered from 2026 onwards.
Demolitions
The Shadow fleet is absorbing older vessels that would normally be sent to scrapyards. So far in 2024, demolition rates are at their lowest levels in 30 years, measured by both vessel count and total deadweight capacity.
The demolition of large Oil Tankers has nearly come to a halt over the past two years. For VLCCs (200,000 MT of deadweight or larger), the demolition rate has indeed been zero. The last time a VLCC arrived at a scrap yard was in October 2022. However, the second-hand market tells a different story. Most sales in this market consist of older ships, which are prime candidates for scrapping.
During the same period, the average age of Tankers over 200,000 MT of deadweight sold on the second-hand market is close to 16 years. Notably, Tankers purchased by undisclosed companies or entities with no prior track record of ship management tend to be even older. Due to high demand after the invasion of Ukraine, mainstream owners have made significant profits from selling aging vessels that ended up in the shadow fleet. In 2022, for Aframax, Suezmax and VLCC, second-hand prices for 5-year-old ships or older increased by an average of 45% compared to 2021. In 2023, the year-over-year increase was almost 40%, and for 2024 we are seeing a 10% year-over-year growth.
A historical analysis of Oil Tanker demolitions reveals significant fluctuations in scrapping rates across different Tanker categories. For instance, 2018 saw a notable peak with 100 Tankers scrapped, including 45 Suezmax vessels. 2023 and especially 2024 have shown a sharp decline in demolitions, as only six ships were scrapped so far this year.
Looking back at historical development and trends, Tanker demolitions have a strong correlation to earnings. However, any estimation is contingent on various unpredictable factors, including geopolitical events and shifts in global trade patterns.
In particular, the dynamics of the so-called Shadow fleet, which currently represents over 11% of the active Tanker fleet, is difficult to predict. The rapid increase of the Shadow fleet since 2022 is a temporary phenomenon that largely affects the market. It is certain that strengthening of sanctions and control over the Dark trade could make the Shadow fleet unviable, leading to an increase in demolitions. It is a possible scenario, but we also don't know if it will become relatively abrupt or gradual. To date, measured in number of vessels and total deadweight capacity, demolition rates are at their lowest levels in 30 years.
Tanker Fleet Outlook
The global Tanker fleet is set to undergo significant developments throughout 2024 and into 2025, driven by both the delivery of newly contracted vessels and strategic growth across different tanker segments. In the Product Tanker market, the industry is preparing for a considerable expansion as numerous recently contracted vessels are expected to be delivered in 2025 and 2026. For 2024, fleet growth is projected to be 2%, with an even larger increase of 3.7% anticipated in 2025. This wave of new product tankers entering the market is likely to shape global shipping dynamics in the years ahead, especially as these tankers take on a larger share of product transportation duties.
In the Crude Oil sector, fleet expansion will be more modest. The total deadweight tonnage capacity of Crude Oil Tankers is expected to grow by only 0.4% in 2024, followed by a more robust 1.4% increase in 2025. While these numbers may seem conservative compared to the Product Tanker segment, they indicate a steady and calculated growth path that reflects the current market conditions and demand forecasts. The outlook is different across tanker sizes, however, with the VLCC segment not expecting any growth during this period. Instead, the Suezmax and Aframax segments will be the key drivers of Tanker fleet growth. Suezmax capacity is forecast to grow by 4.7% throughout 2024 and 2025, while the Aframax/LR2 segment is set to see an even higher growth rate of over 7%, making these two segments pivotal in the overall expansion of the Tanker market. The growth rates of these segments are notably higher than the forecasted overall fleet growth rate of 3.1%, highlighting their increasing importance in the global oil supply chain.
Our AXSInsights module provides specifically-designed reports, giving its users the ability to monitor and track every aspect of the Tanker fleet, from the ordering of each vessel, through her operational life, to her scrapping.
