- Older vessels benefit from parallel dark fleet operations outside compliance regimes.
- China leverages financing and sanctions-driven opportunities for vintage VLCCs.
- South Korea focuses on mid-life VLCCs, Japan avoids older units in favour of MR2s.
According to Veson Nautical, there’s been a notable surge in demand for vintage very large crude carriers (VLCCs) among Chinese buyers. In fact, a whopping 81% of their purchases over the past five years have been vessels older than 15 years. The firm’s report, titled The Changing Face of Asian S&P Behaviour, highlights that the value of 25-year-old VLCCs has skyrocketed by 31.6% this year alone, while five-year-old units have only seen a modest growth of 0.5%. This shift reflects how sanctions and changing oil flows, particularly since Russia’s invasion of Ukraine, have completely disrupted the usual market dynamics, reports Safety4Sea.
China’s Appetite for Older VLCCs
“Vintage VLCCs are now trading at levels that would have been unthinkable just a few years ago. The July sale of the Eon (ex. Atlantic Loyalty) for USD 44 million is nearly double the fixed aged term median. This underlines how demand linked to sanctioned trades is reshaping asset values and overturning conventional market logic,” said Matt Freeman, Senior Vice President of Values and Analytics at Veson Nautical.
China’s interest in older VLCCs is driven by a mix of structural and geopolitical factors. The Western sanctions on Russian crude have split the market into two distinct systems, leading to the emergence of a so-called “dark fleet” of older tankers that operate outside the typical compliance frameworks. These vessels, which average 18.1 years in age compared to just 10.4 years for the compliant fleet, have found new life in sanctioned trades where availability is prioritised over reputation and insurance. In this alternative market, older VLCCs can fetch significant premiums over their younger counterparts, as the number of vessels willing to take on regulatory risks is quite limited.
A Calculated Strategy in a Reshaped Market
The report suggests that what might seem illogical in traditional shipping cycles is actually a well-thought-out strategy in a transformed market. The combination of sanctions, capital advantages, and shifting trade flows has created a scenario where vintage vessels are increasingly favoured, especially by Chinese buyers.
China’s Strategy
“China’s buying strategy makes sense once you understand the forces reshaping tanker markets,” said Matt Freeman, Senior Vice President of Values and Analytics at Veson Nautical.
Sanctions have led to the emergence of a parallel trading system where older Very Large Crude Carriers (VLCCs) can actually earn more than their younger counterparts. Thanks to favourable financing conditions, Chinese owners are able to act swiftly and take advantage of these opportunities. On top of that, the increase in Russian crude oil flowing into Asia has created a consistent demand, making these older vessels more valuable than ever.
Diverging Strategies Across Asia
While Chinese buyers are leading the charge in overall purchases and are particularly focused on vintage VLCCs, South Korean owners are taking a different route by acquiring mid-life vessels as a countercyclical strategy. Meanwhile, Japanese buyers have mostly steered clear of older VLCCs, opting instead for younger MR2s, which are seen as more versatile. These differing strategies highlight the various financing structures, regulatory challenges, and long-term goals that shape their decisions.
“China concentrates on vintage VLCCs, often targeting sanction-exposed trades where premiums are unavailable to modern tonnage, while South Korean owners adopt a more countercyclical but quality-driven approach to mid-life vessels,” said Felix Tordoff, Junior Valuation Analyst at Veson Nautical. “Japanese buyers largely avoid older VLCCs, focusing instead on younger MR2s that align with stricter financing and regulatory requirements.” Taken together, these strategies demonstrate how structural forces are redefining the market far beyond short-term cycles.
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Source: Safety4Sea
