The war in Ukraine, coupled with the EU’s ban on Russian oil products, is driving product tanker rates higher, contributing to a surge in newbuild orders.
That’s according to a new report by Bimco which reveals that the product tanker order book to fleet ratio increased from 5.4% in December 2022 to 9.3% in June 2023 due to a 337% year-over-year increase in newbuild contracting during the first half of the year.
The results of the report, published by gCaptain, reveal that product tanker contracting in the first half reached 8.9 million dwt, meaning more product tankers were ordered in the first half of this year compared to all of last year. LR2 ships saw the most significant increase, with 5.6 million dwt contracted, equating to 21.6% of the current LR2 fleet.
Ships contracted this year are scheduled to be delivered in 2025 and 2026.
The report points out that the increase in contracting could help rejuvenate the ageing fleet as the average age of ships in the product tanker fleet is now nearly 13 years.
The ban of Russian oil products due to the war in Ukraine has increased demand for product tankers, resulting in higher volumes and longer sailings, which has boosted freight rates and contributed to the rise in the new ship orders.
However, the International Energy Agency predicts that oil demand could peak in 2028, limiting further fleet growth and potentially shifting focus to replacing ageing ships and reducing emissions, Bimco says.