Demand for tankers aged from 15-years and older have been in high demand in the secondhand market. In its latest weekly report, shipbroker Gibson (https://www.gibsons.co.uk/) said that “this year, 15-year-old crude tanker values have broadly outperformed the rest of the secondhand tanker market in terms of both prices and enquiry. The main reason for this appears to be the impending sanctions and corresponding G7 price cap on Russian oil and products due to come into force from the 5th December and 5 th February respectively. This is expected to lead to a large increase in the fleet of tankers involved in sanctioned oil trades, especially for Russian cargos given that Aframaxes and Suezmaxes typically dominate this market. Since January, values for these two tanker sizes have appreciated more than VLCCs in the 15- year-old age segment, rising by approximately 58% and 61% respectively compared to 50% for VLCCs. However, we may now be seeing signs of a slowdown in both the demand for these tankers as well as potential the start of a softening of asset values”.
According to Gibson, “between September and October 15- year-old Aframax prices fell by $2 million, whilst larger Suezmaxes fell by $1 million. Both vessel sizes are still valued well above their average since 2015 and since June, both sizes have been valued close to parity, although this might suggest an overheating in 15-year-old Aframax market values relative to their fundamental value and size, which had in fact surpassed the long term Suezmax average price in April. Anecdotally, there are reports of potential buyers backing away from deals. This trend is supported by Gibson’s tanker sale data that shows a gradual decline in the number of Suezmax and Aframaxes aged over 15 being sold or reported sold”.
The shipbroker added that “for example, older Aframax/LR2 S&P activity peaked in May-August, when 39 transactions were recorded compared to September which witnessed 6 deals and subsequently slipped to 5 in October. Nevertheless, this is still relatively high compared to seasonal trends in 2020 and 2021. This suggests that for the time being demand remains supported by potential Russian linked business even if the rate of sales has declined”.
Gibson added that “some players may simply be waiting to see how the imposition of new trading sanctions plays out before making any further moves in the S&P market. Beyond the start of crude sanctions on December 5th, further fleet capacity may still be required to facilitate the shipment of Russian oil, but this depends on the level of demand from purchasers of Russian crude. Furthermore, demand for older Aframaxes and Suezmaxes should also remain at elevated levels into the new year as vessels involved in sanctioned trades often operate inefficiently, with the long-haul distances that Russian crude needs to be shipped to its main customers in Asia eating further into the existing fleet capacity. Increased due diligence and compliance checks may make vessel transactions harder if the buying counter party has fallen afoul of the price cap or has been linked to a sanctioned entity meaning we are unlikely to see the volume of transactions seen this year. However, recent history shows even in the case of Iranian and Venezuelan linked buyers, there are ways to circumvent these checks”.
“How this impacts the rest of the tanker market remains to be seen. In theory, capacity in the non-sanctioned market is/will be reduced as older units enter the Russian focused market. However, on balance this may not result in an overall reduction in vessel supply as international tonnage previously trading Russian cargos will have to leave that market and re-enter the mainstream trade, posing the risk of a sudden increase in vessel availability. Although, at the time of writing the EU is at an impasse on the price cap and so the extent to which shipping companies in price cap coalition countries could leave the Russian market is unclear. Whilst some could argue the real date to bear in mind is the 19th January when all Russian crude cargos must be completely discharged from vessels, question remain as to how this will all play out in practice but all eyes are now on December 5th”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide