The crude tanker industry is currently seeing its biggest shipbuilding boom in almost ten years. The ratio of orders to the existing fleet has risen to 14.1 percent, the highest level since 2016. This indicates a potential effort to renew an aging global fleet.
BIMCO's latest analysis reveals a significant turnaround from March 2023, when this ratio dropped to just 2.8 percent due to extremely low contracting volumes in 2022.
“Last year saw very few contracts, which led to the crude tanker order book/fleet ratio falling to 2.8% in March 2023. However, it has been steadily increasing and has now reached a nine-year high of 14.1%. This order book could be the start of renewing a fleet that has been aging since 2018,” said Niels Rasmussen, Chief Shipping Analyst at BIMCO.
Since the beginning of 2023, shipowners have ordered 325 crude tankers with a total deadweight capacity of 68.7 million tonnes. Currently, there are 309 vessels in the order book, amounting to 65.8 million DWT, with peak deliveries expected to reach 28.2 million DWT by 2027. Almost all of the ordered ships—98 percent—are set to be delivered by the end of 2028.
Asian shipyards lead the way in this sector, with Chinese yards accounting for 60 percent of the ordered crude tanker capacity, followed by South Korea with 31 percent, and Japan with 8 percent. The majority of new orders are for Suezmax and VLCC tankers, with 135 and 128 vessels ordered, respectively.
However, this growth is set against a backdrop of uncertainty regarding future oil demand. The International Energy Agency's recent World Energy Outlook estimates that global oil demand will grow by a maximum of 0.7 percent annually from 2024 to 2035.
“The order book appears to be quite large compared to the anticipated growth in global oil demand,” Rasmussen pointed out.
In more aggressive decarbonization scenarios that align with the Paris Agreement's 1.5°C goal, global oil demand could actually decrease by 3.3 percent each year, according to IEA forecasts.
Maintaining a balance in the market depends on recycling old vessels. Currently, 18.2 percent of the crude tanker fleet is 20 years or older, which accounts for 17.2 percent of the total fleet capacity—slightly more than the order book.
However, there are challenges ahead. Rasmussen highlighted that over 40 percent of the recycling potential comes from ships currently under sanctions, which also restricts their sale. This could delay recycling and decrease scrap values.
“Despite the large order book and potentially weak demand growth, it seems likely that the market can balance supply and demand if older ships are recycled,” Rasmussen stated.
The analysis indicates that the industry faces a tricky task: modernizing an aging fleet while avoiding oversupply in a market where demand growth may slow or even decline as the world moves away from fossil fuels.