Bullish secondhand tanker market sets new records

Even seasoned brokers were left speechless when ADNOC L&S bought the 15-year-old VLCC, Olympic Leopard, for $115 million a couple of weeks ago. The price, about 10% less than the prevailing newbuilding price in China today, is believed to be a record for a VLCC of this vintage.

The hot secondhand market has been evident across all energy-related sectors. But large tankers have been stars of the show as oil producers and energy firms seek ways round the world’s fractured energy supply chains across the crude, products, and gas trades.

ADNOC has been steadily snapping up secondhand VLCCs and large gas carriers as part of a $1.3 billion acquisition strategy as it seeks to cover more of its own exports including those from its West-East pipeline terminal in Fujairah which bypasses the Strait of Hormuz. The facility is under a fast-track expansion project that will double capacity from 2027.

In the market, large secondhand tankers, available promptly, are commanding significant premiums over newbuildings. A VLCC resale, with a newbuilding price of about $130 million, could cost anywhere between $135 million and $170 million, according to brokers, with a brand new resale at even higher figures. The same picture is evident in the Suezmax sector, with five-year-old Suezmaxes close to $110 million compared with newbuilding prices at around $90 million.

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The various conflicts, pushing up tonne-miles by multiples, are also the catalyst for new large-scale contracts for VLCC and Suezmax tonnage. Recent deals include a series of 20 VLCCs ordered by George Procopiou’s Dynacom at Hengli Heavy Industry in China, as well as nine 158,000 dwt Suezmaxes.

Athens-based United Overseas Group, controlled by Peter Georgiopoulos and Leo Vrondissis, has ordered six, option four, VLCCs at Wison New Energies. Meanwhile, Scorpio Tankers, headed by Emanuele Lauro, has taken a stake in a joint venture that recently ordered eight VLCCs. And the list goes on.

Around 60 VLCCs are due for delivery in 2027; close to 130 in 2028; and more than 120 in 2029, according to statistics from Maritime Strategies International.

Tanker owners are clearly fixed on the here and now – the various conflicts and their impact on the key maritime trade lanes in focus today. But the longer-term outlook is favourable too.

Recent analysis by New York broker, Poten & Partners, noted the recent decline in OPEC’s influence over tanker trades. Recent hostilities in the Middle East have created a powerful incentive for growth in non-OPEC production, the firm said.

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Crude oil output in Canada, the US, and South America – Guyana, Brazil, Argentina – has expanded dramatically over the last decade. The US remains a key exporter – Canada’s Trans Mountain trade is underpinning new trans-Pacific business, Guyana is commissioning one FPSO after another, and offshore output is expanding in Brazil.

Much of the new production is destined for export markets, Poten notes, either because of saturated domestic markets in the US and Canada, or limited domestic demand in Guyana and Suriname. Most of the incremental oil is destined for markets in Asia, benefiting the large tanker sector.

In the longer term, Poten believes that the relentless rise of the Americas is a potential headache for OPEC. Recapturing market share after the Middle East conflicts will be challenging as Asian buyers seek to diversify away from the region to more stable geographies in the Atlantic Basin.