Feature, Freight News, Logistics, Sea

Product Tanker Contracts Drop to 9-year Low

[ September 12, 2025   //   Gary Burrows ]

Product tanker newbuilding contracts in the first eight months of the year dropped 86 percent year-over-year to 2 million deadweight tonnes, representing a nine-year low, said BIMCO Shipping Analysis Manager Filipe Gouveia.

The development marks a stark reversal from the boom seen in 2023 and 2024. During those years, ships in the Long-Range 2 and Medium-Range segments dominated the order book. A pick-up in contracting for Long-Range 1s was also notable since this segment’s fleet has been shrinking so far this decade. This caused the order book to peak in November 2024 at 42.2 million dwt, the highest since 2008.

Since the start of 2025, the product tanker order book has shrunk by 12 percent. Currently, LR2 ships account for 48 percent of the dwt capacity on order, followed by 37 percent for MRs and 13 percent for LR1s, the remaining being in the handysize segment. Contracting decreased across all segments and although MRs fared the best, they still fell 76 percent year-over-year.

“Despite the slowdown in contracting, the order book remains large at 37.2 million dwt, equivalent to 19.2 percent of the product tanker fleet,” Gouveia said. “This will lead to an increase in deliveries over the next two years which could pressure freight rates further and encourage recycling of older ships.”

The high number of newbuilt ship deliveries will assist fleet renewal in the product tanker fleet. It has been gradually aging since 2011, and the average tanker is now 14 years old.

Low recycling activity in recent years has contributed to the aging of the fleet and by now, 20 percent of the product tanker fleet’s capacity is provided by ships 20-years-old or older. Relative to historical recycling patterns, BIMCO estimates that the current recycling overhand could be as high as 10 percent of the trading fleet. Significant potential to manage future fleet growth through recycling therefore exists.

Out of the current order book, 11 percent of the contracted capacity will be capable of using alternative fuels upon delivery, while an additional 22 percent will be ready for future retrofitting. Out of the capable ships, 90 percent will be equipped to use LNG while the rest will be able to use methanol.

“Product tanker contracting could remain low in the near term amid the large order book and a weak long-term demand outlook. According to the International Energy Agency, demand for global refined products could grow marginally in the short term and peak in 2027. A continued shift towards electric vehicles is expected to negatively impact gasoline and diesel demand at a rate that exceeds the growth in demand for naphtha and jet fuel,” Gouveia said.

Tags: BIMCO