Tidal Shift in VLCC Market Dynamics: Anticipation of Orderbook Surge and Increased Tanker Recycling in 2024

Major VLCC Owners Eye Market Revival as Analysts Predict Doubling of Orderbook and Rise in Recycling Amidst Changing Dynamics.

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In its most recent weekly report, maritime industry analyst Poten highlighted a noteworthy development within the Very Large Crude Carrier (VLCC) sector, observing that the VLCC orderbook has reached an almost unprecedented low, comprising a mere 2.6% of the overall trading fleet as of January 1, 2024, totaling just 23 vessels. This figure starkly contrasts with the orderbooks of other maritime segments, such as the Aframax/LR2 and Suezmax sectors, which stand at 12.7% and 9.9%, respectively.

Unlike their smaller counterparts, the VLCC sector did not experience a significant upswing in demand following the Russian invasion of Ukraine or the ongoing Red Sea crisis. However, Poten anticipates a shift in this trend throughout the current year, attributing it to the opening of yard slots resulting from increased orders in the container ship and LNG carrier sectors, which have dominated the newbuilding market in recent years.

Of particular note, major VLCC owners are reportedly reassessing the situation, recognizing the imperative for additional VLCC deliveries to meet the demands of the oil market. Poten predicts a doubling of the VLCC orderbook in the coming year, emphasizing that the impact of new orders placed in 2024 will take several years to manifest in the VLCC demand-supply equilibrium.

Simultaneously, Poten anticipates a rise in tanker recycling in 2024, citing Lloyds List Intelligence figures indicating a mere 14 tankers over 10,000 deadweight tons sent to breaker yards in 2023—a 20-year low. The report underscores the aging nature of the existing fleet and predicts a reversal of this trend in the current year.

However, the report acknowledges potential obstacles to ship sales, particularly with the European Union scrutinizing secondhand sales as part of new sanctions against Russia. This scrutiny could potentially make ship owners more hesitant to sell vessels to unidentified buyers. Nonetheless, the report emphasizes that the dark fleet has reached a size where it can adequately service sanctioned trades, mitigating concerns related to potential sales restrictions.

In conclusion, Poten anticipates a notable increase in tanker recycling in 2024, projecting a figure of at least 50 units, comparable to the 57 vessels scrapped in 2022. This forecast underscores the dynamic nature of the maritime industry, as stakeholders respond to evolving geopolitical and market conditions.

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