Close to one in five VLCCs trading today are over 20 years

As of today, approximately 130 Very Large Crude Carriers (VLCCs) over 20 years old are still active in the market, a significant increase from fewer than 20 five years ago. Data from Tankers International reveals that about two-thirds of these aging supertankers are involved in transporting sanctioned oil. The situation is expected to worsen, with projections indicating that the number of vessels older than 20 years could double within the next four years, representing 21% of the trading fleet.

Aging Fleet and Limited New Orders

The current landscape of the VLCC market is characterized by a stark lack of new orders, contributing to a critical shortage in fleet replacement. In 2022, only one VLCC was delivered, and projections for 2025 indicate that merely five new vessels are scheduled for delivery. Mette Frederiksen, head of research and insight at Tankers International, highlighted this paradox in an article for Splash last month. She noted that while the fleet’s overall numbers are increasing, the effective supply is either stagnant or decreasing. Factors such as indecision among shipowners and bottlenecks at shipyards are impeding the launch of new builds, while older vessels are suffering from efficiency losses. This situation is likely to lead to a prolonged period of supply tightness in the VLCC market.

Higher freight rates despite the increase in the volume of ballast ships as demand gradually rises

The scarcity of viable VLCCs capable of operating internationally has resulted in rising freight rates. For example, the TD3C route from the Middle East to Asia experienced a significant rate increase of $2,100 per day, bringing the total to $55,000 per day as of yesterday. A report from SEB, a Swedish bank, emphasizes that the dwindling number of available vessels is compelling charterers to act quickly to secure their positions in a strengthening market. Unlike previous sharp spikes, the gradual increase in rates is fostering optimism among shipowners for sustained higher earnings, further supported by the tightening vessel supply.