The global Very Large Crude Carrier (VLCC) fleet is undergoing a significant transformation driven by its increasing age. Currently, 16% of the mainstream-trading VLCC fleet is aged 18 years and above, and their utilization in the conventional market has been steadily rising. This older tonnage has played a critical role in facilitating crude oil flows, particularly within the Pacific Basin, reports Breakwave Advisors.
Utilizing Ageing Vessels
The employability of aging Very Large Crude Carriers (VLCCs) has notably increased in recent years. This trend is largely attributed to shipowners of older vessels offering their tonnage at discounted rates, making them an attractive option for charterers.
In the past year, vessels aged over 18 constituted 10% of the global active VLCC fleet. This growing utilization of older ships can be linked to several factors:
- Low VLCC Deliveries: Braemar’s data indicates a limited number of new VLCC deliveries in both 2023 and 2024. This constrained new supply naturally increases demand for existing tonnage, including older vessels.
- Multi-Tiered Fleet Structure: The increasing prevalence of a multi-tiered fleet structure has significantly strengthened the appeal for older vessels to participate in opaque trade routes (involving countries like Russia, Iran, and Venezuela) that operate outside of mainstream sanctions and regulations.
This diversion of older vessels into both mainstream and opaque markets has allowed them to maintain and even grow their market share. Furthermore, it reflects a broader willingness among industry participants to charter older vessels, particularly in the face of constrained overall vessel supply. This suggests that despite the age, the economic viability and necessity of utilizing these vessels remain high in the current market conditions.
Operational Footprint
The operational footprint of the aging mainstream VLCC fleet is predominantly concentrated in the Pacific Basin. This regional concentration suggests that stricter age-related chartering regulations are likely in place within the Atlantic basin, effectively pushing older tonnage towards the Pacific.
Analyzing the distribution of this aging mainstream tonnage:
- The Mideast Gulf accounts for the largest share at 70%.
- Southeast Asia follows with 14%.
- The Red Sea/Gulf of Aden makes up 12%.
Despite the Mideast Gulf holding the largest proportion of aging vessels, these ships play a limited role in Mideast Gulf crude outflows, accounting for only 8% of total mainstream VLCC sailings from the region. This indicates that major oil companies and long-term charterers from the Middle East Gulf tend to prefer newer tonnage for their primary export routes.
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Source: Breakwave Advisors
