Between January and August 2025, product tanker newbuilding contracting plummeted by 86% year-on-year to just 2.6 million deadweight tonnes (DWT), marking the lowest level in nine years.
This sharp decline comes after a strong boom in 2023–2024, when LR2 and MR orders dominated the market. While contracting has slowed, the existing large order book and aging fleet dynamics continue to shape the future of the sector.
Decline in Contracting and Order Book Trends
The order book for product tankers peaked at 42.2 million DWT in November 2024, the highest since 2008, but has since shrunk by 12% in 2025. Currently, LR2 vessels account for nearly half (48%) of the tonnage on order, followed by MRs at 37% and LR1s at 13%.
Despite the slowdown, the order book remains significant at 37.2 million DWT, equivalent to 19.2% of the total product tanker fleet. Deliveries over the next two years could place downward pressure on freight rates and increase the likelihood of recycling older vessels.
Aging Fleet and Recycling Outlook
The global product tanker fleet has been steadily aging since 2011, with the average ship now 14 years old. About 20% of capacity comes from vessels over 20 years old, creating a significant recycling overhang estimated at up to 10% of the trading fleet. This presents an opportunity for fleet renewal through removals.
Scheduled deliveries in the coming years will support this transition, particularly as 11% of contracted tonnage is already capable of running on alternative fuels and 22% is prepared for future retrofitting. LNG remains the dominant alternative fuel choice, followed by methanol.
The near-term outlook for product tanker contracting remains weak due to the already large order book and a subdued long-term demand forecast. According to the International Energy Agency, refined product demand is expected to peak in 2027, with electric vehicle adoption set to weigh heavily on gasoline and diesel consumption.
Although contracting has slowed, the combination of fleet aging, recycling potential, and alternative fuel readiness suggests that renewal strategies will play a key role in shaping the future of the product tanker market.
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Source: BIMCO
