- China’s slowing demand shifts import patterns to nearer suppliers.
- India, Vietnam and Indonesia drive regional energy growth.
- Freight rates surge despite weaker Chinese growth.
The shorter voyage distances for crude cargoes heading east of the Suez Canal, along with India’s readiness to test the waters with the US, are expected to influence the ageing tanker fleet market in the months ahead. While Chinese oil demand growth has slowed, it still plays a crucial role in driving freight, as noted by CMB.TECH during their Q2 earnings call on August 28. Analysts from S&P Global Commodity Insights predict that Asia’s demand for refined products will rise by 341,000 barrels per day in Q3. However, this represents a downward adjustment of 78,000 barrels per day, largely due to weaker demand in China and South Korea, although it’s somewhat offset by growth in Southeast and South Asia, reports S&P Global.
China’s Evolving Import Mix
“As China’s economy slows or its domestic refining capacity and storage are adjusted, its import patterns change,” said Fotios Katsoulas, shipping analyst at Commodity Insights.
“This could mean a shift in where it sources its crude — for example, moving away from longer-haul voyages from the Americas or West Africa and increasing imports from closer suppliers in the Middle East or Russia.”
Countries like India, Vietnam, and Indonesia are experiencing robust economic growth and an increasing energy demand.“We could see a rise in intra-Asian trade flows, which typically involve shorter voyages,” Katsoulas added.
Freight Market Still Supported
Even with the slowdown in China’s growth, the freight markets are holding strong. Platts reported that the benchmark VLCC rate from the Persian Gulf to China was at $17.74/mt on September 9, marking a 100% increase since January and 55% higher than the five-year average.
Russian crude flows to China rose 12% month on month in August to 1.109 million b/d, while Indian imports of Russian crude fell 21% to 1.3 million b/d. Analysts at Gibson noted: “The balancing act is as much political as economic, with Prime Minister Narendra Modi seemingly portraying unity with Putin and China’s Xi Jinping at a summit. The question remains: how long can India maintain this middle ground before Washington’s pressure begins to bite.”
OPEC+ Supply Dynamics
The tanker market outlook also depends on OPEC+ supply moves. Frontline noted that production increases have been modest due to compensation cuts and capacity limits. Still, the group has begun winding down 1.65 million b/d of voluntary cuts, with quota hikes planned from October.
“Middle East crude often travels to nearby Asian markets, which are shorter hauls compared to voyages to Europe or the Americas,” said Katsoulas. He added that this could amplify the effect of tankers resuming Red Sea navigation.
Tonnage Outlook and Aging Fleet
BIMCO projects crude tanker supply growth of 0.5% in 2025 and 1.5% in 2026, led by the Suezmax and VLCC segments, with some Aframax reductions expected from scrapping. CMBT CEO Alex Saverys said: “So there will be more oil, more oil means more storage, more oil should mean also lower prices, which could be very supportive for our tanker markets.”
While fleet additions remain limited in the near term, more ships are expected from H2 2026 onward. “In any case, the fleet is likely to be elderly and by 2030, 40% of the VLCCs and 40% of existing Suezmaxes will be older than 20 years,” Saverys added.
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Source: S&P Global
