According to BIMCO, product tanker contracting in 2024 has so far reached an 18-year high, representing a 17% increase year-on-year.
The world’s largest association of shipowners reports that in the first seven months of 2024, contract levels reached the second highest ever, with 194 product tankers with a deadweight tonnage of more than 10,000 tons (DWT) and a total capacity of 13.3 million DWT being contracted.
The boom follows an already strong performance in 2023, which saw the third highest level of contracts. The backlog 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 are the main beneficiaries of renewed product tanker newbuilding, securing 72% of the current order book. The order book-to-fleet ratio has also increased significantly, from 5.9% at the beginning of 2023 to 19.6% currently.
However, industry experts warn of a potential oversupply in the coming years. Niels Rasmussen, Chief Shipping Analyst at BIMCO, points out that while demand for petrochemicals could continue to rise, 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 and 2027, there is significant potential for fleet growth that could outpace demand.
However, despite the ageing fleet, current strong market conditions do not indicate an imminent increase in ship recycling. Even with aggressive recycling estimates, the fleet is expected to grow by 23.3 million DWT (12.5%) by the end of 2027.
Given the rapid growth of the industry, stakeholders are advised to closely monitor market conditions and adapt their strategies to maintain a balance between supply and demand in the product tanker sector.
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