Product Tanker Newbuilding Contracts Hit 10-Year High

File photo of a product tanker underway at sea
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According to BIMCO, product tanker newbuilding contracts have reached a 10-year high in 2023. In the first eight months of the year, 140 newbuilding tankers with a total deadweight capacity of 10.72 million tonnes were ordered. This has been the highest number of contracts since 2013, following several years of low activity in the sector. BIMCO attributes this surge in contracts to the strong product tanker market, which is expected to remain robust until at least 2024.

However, the future fleet planning for product tankers faces challenges due to vessel recycling and decarbonization regulations. Fleet growth has been low in recent years, with deliveries expected to remain low until 2025. Vessel recycling will further limit fleet growth, as 9% of product tankers are over twenty years old and prepared for recycling. Additionally, stricter greenhouse gas emissions targets will necessitate the retirement of older tankers.

The impact of decarbonization regulations on fleet planning is another challenge. Despite these regulations, only 16% of ships on the order book are expected to use alternative fuels. BIMCO highlights the need to balance fleet renewal for decarbonization goals with the potential decrease in demand for transportation fuel, which is forecasted to peak in 2026. The industry will need to carefully consider these factors when planning the future fleet.

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