Greek shipowner George Procopiou’s company, Dynacom Tankers Management (Dynacom Tankers), has been a significant player in the industry, having ordered about 40 tankers in the last two years alone. Recently, the company made headlines by tapping into the resale market, securing two 306,000-dwt very large crude carriers (VLCCs) originally booked at China’s Hengli Heavy Industry for approximately $120 million each (about 16.52 billion won).
Resale in the maritime industry involves selling or acquiring ships under construction to or from another owner when there’s high demand for a particular type of vessel. Dynacom Tankers’ recent resale activity can be interpreted as a strategic move to secure tankers ahead of potential price increases for VLCCs. According to an industry insider, this marks the first time in nearly a decade that the Greek company has ventured into the resale market.
The current state of the tanker market reflects a supply shortage, particularly in the VLCC segment of 150,000-dwt and above. This scarcity is attributed to decreased crude carrier newbuild contracts due to expectations of reduced oil consumption under global carbon regulations. Despite the trend, world oil consumption is increasing. Additionally, the aging commercial lifespan of tankers, which averages around 30 years, further contributes to the shortage. Major shipbuilders’ orderbooks are dominated by vessel orders other than tankers, leading to prolonged delivery times of approximately three years for new orders and intensifying competition in the resale market.
Market analysis from Clarksons Research indicates that the prices of used 310,000-dwt VLCCs aged five years have risen 8% year-to-date to reach $113 million (about 155.8 billion won). For instance, the recent sale of the 300,000-dwt Eco Seas in February fetched $98.5 million (about 135.8 billion won), a notable increase from the $97 million sold for by Daewoo Shipbuilding & Marine Engineering (currently Hanwha Ocean) in 2016.
In recent years, the tanker market has faced sluggish growth. The tightening of carbon regulations by the International Maritime Organization (IMO) has put tankers at risk of being earlier scrapped, particularly those powered by fossil fuels. However, despite these regulatory pressures, there has been an unexpected rise in oil consumption. U.S. Energy Information Administration (EIA) data shows that oil consumption averaged 91.62 million daily barrels in 2020. Projections indicate that consumption is set to increase further, reaching 129.1 million barrels per day this year and 142.6 million per day next year.
Despite concerns over tightening carbon regulations by the International Maritime Organization (IMO) and the potential impact on tanker scrappage rates, oil consumption has continued to grow. Data from the U.S. Energy Information Administration shows that oil consumption averaged 91.62 million barrels per day in 2020, with projections of reaching 102.91 million barrels per day this year and 104.26 million barrels per day next year.
The tanker market experienced a notable turnaround in the latter half of the previous year. In October 2023, Norwegian billionaires John Fredriksen’s Seadrill and Frontline Ltd acquired 24 second-hand VLCCs with an average age of 5.3 years for approximately $2.37 billion (about 3.1725 trillion won). Industry experts speculated that this move was a bet on the expected increase in freight rates over the following two years, driven by an anticipated shortage of newly delivered VLCCs.
Several geopolitical factors, including the Russian-Ukrainian conflict and the Red Sea crisis, contributed to a surge in crude oil volumes requiring transportation across long distances. By the end of the current year, a shortage of 129 VLCCs is forecasted, with orders placed now not expected to join the fleet until late 2026.
In 2021, South Korean shipbuilders secured orders for 29 VLCCs, but none were recorded for 2022 or 2023. This was primarily due to a surge in orders for higher-value vessels like liquefied natural gas (LNG) carriers and a lack of necessity to compete with China on VLCC prices. However, with both newbuilding and used VLCC prices on the rise, South Korean shipbuilders have now shifted their stance and are actively pursuing VLCC orders.
The Newbuilding Price Index of VLCCs has surged by approximately 41% from April 2021 to the present, reaching 125.63 as of Apr. 25. Notably, Hanwha Ocean resumed business in February with a contract for two VLCCs valued at 342 billion won (about $247.88 million), marking the highest-priced deal since the 2008 financial crisis. Additionally, HD Korea Shipbuilding & Offshore Engineering secured an order for four VLCCs in February valued at 68.8 billion won (about $498.44 million). A shipbuilding industry insider noted that VLCCs are emerging as a new high-margin vessel type alongside LNG and ammonia carriers.
