Product-capable vessel orders, including IMO-class coated tankers, have seen a sharp rise, with 293 orders placed by September 2024. Geopolitical tensions have driven short-term demand, but long-term prospects face challenges due to fleet ageing, shifting fuel trends, and regulatory pressures.
Aging Fleet and Need for Replacement
- Around 37% of MR and 32% of LR2 fleets are over 15 years old.
- Rising tanker earnings and fewer demolitions delay scrapping, leading to an ageing fleet and increasing pressure for replacement orders.
Geopolitical Tensions Boost Short-Term Demand
- Conflicts like the Russia-Ukraine war and the Red Sea crisis have temporarily surged demand.
- This geopolitical volatility supports earnings but is unlikely to sustain long-term growth in refined product trade.
Decline in Fuel Demand and Impact on Future Orders
- Gasoline and diesel demand is projected to drop by the end of the decade due to the rise of EVs and alternative fuels.
- Future vessel orders will likely focus on regulatory compliance and replacement tonnage rather than growth-driven demand.
While new orders remain high in the short term, long-term prospects suggest cautious investments focused on replacing ageing vessels that meet stringent environmental standards.
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Source: Drewry
