Tanker freight rates are projected to increase in 2025 due to ongoing US sanctions and geopolitical uncertainties. However, this upward trend will be tempered by new vessel deliveries and the growing flexibility of tankers to switch between crude oil and refined products, potentially limiting significant rate hikes, reports S&P Global.
Strong Performance Expected
Recently, several Suezmax ships explored the possibility of transporting clean cargo to enhance their earnings. However, this trend did not materialize for most vessels due to concurrent increases in dirty tanker freight rates. Market participants at an SMF event predicted that tankers will increasingly switch between clean and dirty cargoes to maximize earnings.
Platts’ Global VLCC Index (GVI 7) for non-scrubber, non-eco VLCCs averaged $28,277/day in 2024, while the index for scrubber-fitted and eco VLCCs averaged $40,641/day. This significant difference underscores the substantial earnings potential of scrubbers and HSFO.
Ole-Rikard Hammer, a senior analyst at Arctic Securities, anticipates stronger performance for VLCCs in 2025. However, he also predicts a potential decline in MR tanker earnings due to the expected delivery of over 100 new MR vessels this year.
Impact Of Sanctions
According to Edward Finley-Richardson, a shipping analyst at Contango Research, almost 10% of the global VLCC and Suezmax fleet and 18% of Aframaxes are now under sanctions. Notably, 75% of Aframaxes that frequently transport Russian cargo are now sanctioned, potentially encouraging these vessels to shift towards dirty cargo transportation.
The latest sanctions have significantly impacted Aframax freight rates, particularly for shipments from Russia’s Kozmino port to North China. Rates have surged to over $6 million, a substantial increase from $1.625 million before the sanctions.
Hammer emphasized that the effectiveness of these sanctions will depend on their implementation. He noted that broader sanctions, including those targeting Russian energy producers like Gazpromneft and Surgutneftegas, and major insurance companies like Ingosstrakh and Alfastrakhovanie, could significantly impact the Russian energy sector.
With Aframaxes facing increased pressure, VLCCs are likely to play a more significant role in transporting Russian crude oil. The benchmark Persian Gulf-China VLCC freight has surpassed the key psychological barrier of w70, reflecting the significant impact of these sanctions on the tanker market.
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Source: S&P Global
