According to Breakwave Advisors, the tanker market remains in the midst of a cyclical upturn, though recent forecasts suggest caution. While high freight rates are anticipated, several key assumptions face challenges, leading to potential changes in the market’s future.
Older Ships and Chartering
The forecast expects that charterers will increasingly fix older ships due to the scarcity of modern tankers. As the demand for tankers grows faster than new builds can be delivered, older vessels may see increased demand, driving up freight prices. However, if risk management teams refuse to charter these aging ships or accidents occur, it could lead to tighter regulations, especially in regions like Europe, reducing the availability of older tankers. Additionally, geopolitical factors and sanctions could push older vessels back into active service, particularly in sanctioned or less-regulated markets.
New Building Orders and Yard Capacity
Tanker newbuilding orders for 2027 and beyond may slow as owners weigh the risks of delivering vessels into a potentially weaker market. Though some shipyards, particularly in China, are expanding capacity, high steel and labor costs will keep ship prices elevated. If owners continue to see opportunities for new profits, or if other shipping sectors like container ships face downturns, tanker orders could fill available shipyard slots more quickly, potentially increasing the number of new tankers entering the market by the late 2020s.
Scrapping and Fleet Supply
Despite many tankers nearing or exceeding 20 years of age, owners are hesitant to scrap vessels given the current market conditions. As owners opt for costly surveys and maintenance, the global fleet is expected to grow by nearly 11% over the next five years. However, an unforeseen event such as an environmental regulation overhaul or a high-profile oil spill involving an older vessel could push a wave of scrapping, shrinking the fleet faster than expected. This scenario would drastically alter supply and potentially stabilize rates at higher levels for newer, compliant tankers.
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Source: Breakwave advisors
