During the first 8 months of 2023, contracting of product tanker newbuilds hit a 10-year high, reaching 140 ships and 10.72 million deadweight tons (DWT). The last time more than 10 million DWT were contracted from January to August
was in 2013.

Newbuild tanker contracting activity during the past  5 years has been low at about 5.46 million DWT per year.

Moreover, the tanker order book hit a low of 9.67 million DWT in December 2022, the smallest order book since June 2001.

Due to the low contracting of ships, the fleet has only grown at an average annual rate of 2.6% between 2018 and 2023.

Deliveries from the current order book will remain low until 2025, when they are expected to exceed 8 million DWT for the first time since 2009 as shown in the chart below.

Deliveries may end higher as ships can still be contracted for 2025 delivery and beyond.

However, recycling of ships will temper future fleet growth although markets are expected to stay strong through at least 2024. This will incentivize ship-owners to keep their ships in operation for longer.

In addition, the sanctions on Russian oil product exports by G7 countries appear to have created new trades where the older product tankers remain in demand.

Still, 9% of product tankers, equal to 11.65 million DWT and 6% of the total fleet, are currently more than 20 years old and are prime targets for recycling, not least due to the tightening greenhouse gas emission targets.

Despite decarbonization regulations, the share of ships in the order book that are planned to use some type of alternative fuel remains low.

Only 16% of the ships and the DWT in the order book are currently expected to be prepared for the use of an alternative clean fuel.

Decarbonization’s impact on the demand side must also be a consideration when planning the future fleet.

According to estimates by the International Energy Agency, demand for transport fuels will peak in 2026, and though demand for petrochemical feedstock may continue to grow, the overall peak demand may still be within sight.

Balancing the need for fleet renewal to meet future decarbonization targets while considering the potential for waning demand due to decarbonization remains a key challenge when planning new orders.

Source: BIMCO, https://www.bimco.org/news-and-trends/market-reports/shipping-number-of-the-week/20230921-snow