- Newbuilding Prices Surge Amid Robust Contracting Activity
- Supply-Demand Dynamics to Shape Freight Rates in Tanker Markets
- Fleet Growth Poses Challenges for Product Tankers in Coming Years
The crude tanker market will experience a slight hardening in 2025 with an expected growth rate in demand of 2.5%-3.5%. The product tanker market will likely weaken owing to expected fleet growth outweighing demand, thus placing it at a slight weakening in market conditions. This assumption is based on the expectation that the trend of ships avoiding the Red Sea and Suez Canal will continue through 2025, reports BIMCO.
Market Conditions for 2026
In 2026, market conditions for crude and product tankers will deteriorate even further. The gap between supply and demand growth for crude tankers is expected to be 4 percentage points, while for product tankers, this gap may expand to 12 percentage points. If the access disruptions to the Red Sea and Suez Canal persist until 2026, the supply-demand gap would narrow slightly to 1 percentage point for crude tankers and 6 percentage points for product tankers. However, the product tanker market is expected to face major hurdles even under such conditions.
Freight Rates and Indices
Crude and product tankers have had mixed performances in 2024. The BDTI of the Baltic Exchange reported that the average values in the first three quarters of the year were higher than in 2023 but dropped in October and November to make the YTD average lower than that for last year. While it is true that the Baltic Exchange Clean Tanker Index (BCTI) has been the strongest performer during the first seven months of the year, it has since declined below its 2023 average.
Time Charter Rates and Ship Prices
Despite weaker freight rates in the crude tanker segment, time charter rates and second-hand ship prices remained higher than 2023 levels for much of the year. However, recent months have seen time charter rates for both crude and product tankers fall below last year’s levels, reflecting the softening freight rate environment.
Freight Rate and Price Outlook
The outlook for freight rates and prices is in line with the supply and demand dynamics that are expected to be in place in 2025 and 2026. For 2025, crude tanker freight rates should improve marginally, whereas product tanker rates are likely to weaken marginally. Time charter rates and second-hand ship prices should experience only minor changes during the year and track closely with freight rate trends. Both crude and product tanker freight rates are expected to fall in 2026. Consequently, time charter rates and second-hand prices are likely to decline in tandem with the general market weakening.
Newbuilding Market Trends
The global order book has grown significantly. The growth in new tanker ship contracts was the largest contributor to the year-on-year increase. Container ship contracting has also surpassed expectations and helped maintain the stability of the container order book. The bulk carrier order book has remained stable, at some 10% of fleet size. Newbuilding prices have continued their upward streak, led by strong tanker, container, and some bulk carrier contracting activity. New building prices are again approaching the high end. There is potential for additional price growth, especially should bulk carrier contracting speed up further or container ship demand over the medium term continue ahead of current projections.
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Source: BIMCO
