The tanker shipping market is navigating through a period of significant change, driven by external pressures such as geopolitical tensions and environmental considerations, alongside internal industry dynamics like fleet aging and technological advancements. The next couple of years will likely be marked by strategic adjustments as companies strive to align with the evolving landscape, balancing economic opportunities with environmental responsibilities and regulatory compliance.
Crude tanker fleet capacity is forecasted to grow modestly by 0.6% in 2024 and 1.1% in 2025, with the Aframax and Suezmax segments leading this expansion. Product tanker fleet capacity is predicted to increase by 1.8% in 2024 and significantly by 4.3% in 2025, with the LR2s and MRs segments being the fastest growing.
Regarding the demand and supply dynamics, the crude tanker market is anticipated to see a tightening of the supply/demand balance across both 2024 and 2025, attributed to slow fleet growth and increasing sailing distances. In contrast, the product tanker market is expected to experience a tightening in 2024, followed by a weakening in 2025 as fleet growth outpaces demand. Potential risks to the forecast include slower reductions in inflation and interest rates, particularly in Europe and North America, and the ongoing real estate crisis in China. The resolution of the Red Sea crisis also remains uncertain, with its continuation into the second half of 2024 potentially increasing tanker demand further.
The first few months in 2024, we have seen the tanker freight market experience significant developments due to various geopolitical and operational challenges. Sanctions on Russian oil exports have paradoxically buoyed freight rates for tankers carrying Russian oil, with reported earnings considerably above those of non-Russian trades. Additionally, global shipping routes have been massively reshaped, notably with the redirection of Russian oil towards Asian markets, which has disrupted traditional trade patterns and increased transportation distances.
The European Union's sanctions further complicated the market, impacting insurance and financial services for tankers engaged in Russian oil trades. Despite these tensions, the tanker market has shown resilience, adapting to the evolving landscape with increased transportation distances and heightened freight rates.
The rerouting of vessels around Africa, to avoid the Red Sea and mitigate risks from Houthi attacks, has further tightened vessel capacity and elevated spot rates. These developments underscore the tanker market's critical role in the global energy supply chain and its capacity to navigate geopolitical challenges. While the surge in tanker rates has been remarkable, it is not unprecedented. Back in 2019, a spate of attacks in the Middle East coupled with U.S. sanctions on the Chinese tanker company Cosco led to a dramatic increase in VLCC rates, climbing from $25,000/ day to surpass $150,000/day over a period of six months.
Data Source: Intermodal