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Strong demand has been a key driver of robust product tanker markets, further amplified by geopolitical disruptions. The Russia-Ukraine conflict led to a significant shift in trade flows, boosting products' tonne-mile trade by over 10% in 2022-23. Additionally, vessel rerouting via the Cape of Good Hope, due to Red Sea disruptions, is expected to add around 5% to tonne-mile trade in 2024. These disruptions have reinforced underlying factors like a 6% increase in global oil demand and a 3% rise in refinery capacity from 2021-2024. Overall, tonne-mile trade for products grew 13% in 2022-23, with an 8% gain projected for 2024. On the supply side, product tanker fleet growth has been modest, averaging 2.4% from 2021-2024, compared to 3.5% annually from 2011-2020. Despite this, the MR Pacific basket has recorded 50 negative closings out of the last 69 sessions, plummeting from USD 47,277 per day on June 3, 2024, to USD 16,630 per day on September 4, 2024. Meanwhile, the MR Atlantic basket has suffered a 52% drop during the same period, falling from USD 52,091 per day to USD 24,784 per day. While earnings have eased due to seasonal factors and increased competition from LR2s and crude tankers, supportive fundamentals and seasonal winter gains offer a positive near-term outlook.

The MR2 segment, constitutes a significant portion of the global tanker fleet. As of today, there are approximately 1,757 MR2s in operation, representing around 23% of the total tanker fleet exceeding 10,000 deadweight tons. The MR2 fleet does not exhibit a relatively young age profile, with about 33% of the vessels being 16 years old or older and 8% of the MR2 fleet being 21 year old or older. However, a substantial portion of the fleet, around 8%, is nearing the 21-year mark, which could drive demand for newbuilds to replace aging vessels. The orderbook for MR2 tankers stands at 274 vessels, representing an orderbook-to-fleet ratio of 15.6%. This suggests a healthy level of investment in the segment, indicating confidence in its future prospects. The past two years have witnessed a surge in MR2 orders. In August 2022, there were 98 MR2 orders placed. This figure rose to 147 in August 2023 and further increased to 274 in August 2024, reflecting a growth of 86% within 12 months. Furthermore, the first eight months of 2024 has seen a remarkable 107 MR2 orders placed, already making it the highest annual order number (with four months ahead for the year closing) in at least 16 years. This represents approximately 40% of the total MR2 orderbook. Greek owners have been actively involved in the MR2 market, with 22 orders placed in 2024 out of their total 42 MR2 orders. Chinese owners have also shown interest, placing 14 orders in 2024 out of their total 31 orders. Japanese owners, while having the largest number of MR2 orders overall – 47 vessels - , have not placed any new orders in 2024. This suggests a potential shift in market dynamics for Japanese Owners. In terms of shipbuilding, Chinese yards hold the largest share of MR2 orders with 158, followed by South Korean yards with 66 orders. Notably, 15 Greek orders are placed in South Korean yards, while 27 are in Chinese yards. The MR2 tanker market is experiencing a period of robust growth, driven by factors such as increasing demand for refined petroleum products, ageing fleets, and favorable market conditions. The significant increase in newbuilding orders, particularly in the recent months, highlights the confidence of shipowners and investors in the segment's future prospects and also the need for a fleet renewal.

In conclusion, while the expansion of Chinese shipyards is a factor to watch, the current market dynamics suggest that the risk of overcapacity is manageable. The aging fleet, coupled with the healthy orderbook-to-fleet ratios, along with the future need for better fuel consumption and emission reduction, indicates a strong demand for newbuildings and shipyard slots. The shipbuilding industry's ability to adapt to market conditions and the gradual nature of shipyard expansion will help maintain a balanced supply-demand equilibrium.

Sale and Purchase

Dry:

The dry S&P activity remains robust, with the Capesize, Supramax, and Handysize sectors being the leaders. The Capesize sector has noted an upward trend since August 1st, having increased around 50% since then and being just 21% down from its year-to-date high reached on mid-March. The upward trend has resulted in an increase in buying appetite for Capesize vessels, especially among Chinese buyers. The Newcastlemax "Mineral Charlie" - 205K/2012 HHIC was sold for USD 38.8 mills to Chinese buyers, while the Scrubber fitted Capesize "Nord Magnes"- 180K/2011 HHIC was also sold to Chinese buyers for USD 31.5 mills. Furthermore, on the same sector, the "Alpha Prudence" - 178K/2008 SWS found new owners for 24.5 mills, whilst the "Glovis Ambition" - 173K/2002 NKK changed hands for USD 14.2 mills. Elsewhere, the Ultramax "Amis Miracle" - 63K/2018 Oshima found new owners for USD 34.35 mills, while Greek buyers acquired the Electronic M/E "Eternal Hakata"- 61K/2014 Imabari for USD 24.75 mills. On the Supramax sector, the "Nasco Pearl" - 57K/2010 Zhejiang Zhenghe and "Nasco Jade" - 56K/2010 Zhejiang Zhenghe were sold for high USD 12 mills each. Last but not least, Greek buyers acquired the Handysize "Globe Explorer" - 28K/2015 Imabari for USD 14.7 mills, while the 15-year old "Transformer Ol" - 28K/2009 Shimanami was sold for low USD 9 mills to Vietnamese buyers.

Wet:

The tanker S&P activity was subdued this week, with only 4 sales to reports. The Panamax "Inf Light"- 73K/2006 Dalian was sold for USD 17 mills to Chinese buyers. The MR2 "Pioneer" - 49K/2005 Daewoo found new owners for USD 18 mills. Finally, the Small tanker "Fortune Swan" - 11K/2006 STX changed hands for USD 9.2 mills.

Xclusiv Shipbrokers Inc.