One quarter of tanker fleet to be over 20 years old by 2023

More than 25% of the active tanker fleet, i.e., one quarter, is set to reach 20 years of age by 2023, creating quite a scrapping candidate list going forward.

Illustration; Image credit: Euronav

Data from VesselsValue shows that of the 13, 211 tankers in its data base, including small tankers, over 3,000 are 20 years old and older.

Coupled with over 570 ships that are currently 18 and 19 years old, the estimate is on point, should low scrapping activity continue to prevail.

With regard to the age profile of tankers of 18+ years, Handy/MR tankers account for the biggest share, followed by VLCCs and Aframax and Suezmax tankers.

Dwindling oil demand caused by the COVID-19 pandemic was expected to reduce the global tanker capacity, as owners were predicted to demolish some of their older tonnage bringing some ease to the market.

The scrapping activity has been greatly impacted by the pandemic as outbreaks and governmental measures shut down shipbreaking operations in Asia.

However, there seem to be some positive developments as old vessel supply has begun to respond to higher steel prices, and scheduled environmental regulations prompting an increase in vessel recycling albeit from very low levels, according to Euronav.

Although demolitions are up from the start of last year, only two shuttle tankers and two Aframax crude oil carriers (0.45 million DWT) have been confirmed demolished in the first two months of 2021, according Clarksons’ data.

This is significantly down from the 1.1 million dwt of crude oil tanker
the capacity that left the market in December 2020, BIMCO’s data shows.

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Hence, the race for already scarce cargoes is already underway and the competition is becoming greater as VLCCs that were locked in floating storage return to the market.

The market conditions are likely to become challenging as oil demand continues to be impacted by the pandemic.

Offsetting of the negative trends can be achieved through increased level of recycling, reduced ordering of newbuilds, and increased crude oil production.

Ultimately, the full rebound of tanker markets is expected once oil inventory normalizes and the economic recovery brings oil demand to pre-covid levels.

Industry majors estimate that this should happen at some point in the next 12 months.

When it comes to the demand outlook for tankers, despite the accelerating demand for a greener energy future, Gibson Shipbrokers predicts tankers are here to stay.

“Oil has made the modern world in which we live, finding a replacement for the black gold and the many things that it can provide will be a hard-won process,” Gibson said in a recent report.

“That process now seems to be gaining momentum, but, despite all this, direct replacements will be at least a generation away. Meaning that there will be continued demand for oil, product, and chemical tankers for decades to come, even if the industry has to live with easing absolute demand at some point.”