Credit: Andres Virviescas / Shutterstock.com
Product tanker contracting so far in 2024 has reached an 18-year high, marking a 17% increase compared to the previous year, according to BIMCO.
The world’s largest association of shipowners reports that the first seven months of 2024 have seen contracting levels reach the second-highest on record, with 194 product tankers larger than 10,000 deadweight tonnes (DWT) being contracted, totaling a combined capacity of 13.3 million DWT.
The boom follows an already strong performance in 2023, which saw the third-highest contracting level. The order book has expanded rapidly, growing by 135% in 2023 and a further 45% so far in 2024, reaching a total of 37.1 million DWT.
BIMCO notes that Chinese shipyards have emerged as the primary beneficiaries of renewed product tanker newbuilding, securing 72% of the current order book. The order book to fleet ratio has also seen a significant rise, jumping from 5.9% at the beginning of 2023 to the current 19.6%.
However, industry experts warn of potential oversupply in the coming years. Niels Rasmussen, Chief Shipping Analyst at BIMCO, notes that while demand for petrochemicals may continue to increase, the product tanker sector faces challenges from decarbonization efforts, particularly the electrification of cars. With 90% of the current order book scheduled for delivery between 2025-2027, there’s a significant potential for fleet growth that may outpace demand.
Despite an aging fleet, however, current strong market conditions don’t indicate an imminent increase in ship recycling. Even with aggressive recycling estimates, the fleet is projected to expand by 23.3 million DWT (12.5%) by the end of 2027.
As the industry undergoes this rapid growth, stakeholders are being advised to closely monitor market conditions and adjust their strategies to maintain a balance between supply and demand in the product tanker sector.
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