The tanker market is experiencing an unprecedented boom, with the value of older Very Large Crude Carriers (VLCCs) now exceeding that of newly constructed vessels. For the first time on record, a 10-year-old VLCC is commanding a higher price than a newbuild. For example, a five-year-old South Korean-built VLCC is estimated to be worth around $170 million, and a 10-year-old ship close to $150 million, while a newbuilding costs approximately $135 million. This trend extends across the age curve, with values for 20-year-old VLCCs up 90% year-over-year, now assessed at $71.1 million, compared to just $20.8 million for scrap.
This extraordinary asset inflation is fueled by several factors, primarily geopolitical tensions, particularly in the Middle East. The US-Iran conflict and increased risks in the Strait of Hormuz have made owning tankers a strategic priority for oil-producing nations. Middle Eastern national oil companies (NOCs) are actively acquiring vessels; ADNOC has bought six VLCCs since late July, and Iraq-linked ships have changed hands at incredibly high prices. Since the beginning of the year, the average price of a five-year-old tanker has risen by 35%, with supertankers (VLCCs) increasing by nearly 40%.
The scramble for prompt tonnage is also driven by the long lead times for newbuilds, which can take two to three years to deliver. Owners are capitalizing on the current high freight rates, with benchmark tanker rates now reaching seven figures. For instance, DHT Holdings secured a three-year charter for its 2016-built DHT Panther at $100,000 per day, significantly higher than the $58,545 daily average during the 2008 supercycle. Goldman Sachs warns that crude prices could rally to as much as $120 a barrel if attacks on Middle East shipping intensify.
Analysts note that around 15% of the global VLCC fleet is already involved in shuttle operations around Hormuz. This supply scarcity, fleet inefficiency, depleted inventories, and returning Chinese demand, further exacerbated by the Iran conflict, are driving rates higher. The market is not expected to cool down immediately, with Arrow analysts suggesting that the "ceiling has not been reached" and predicting one of the strongest quarters ever for the tanker market. The high demand is also stretching shipyard capacity, making it difficult for new orders to be fulfilled quickly, further incentivizing the purchase of older vessels.
Secondhand VLCCs are now valued at approximately $182 million, while newbuilds are around $130 million, according to Erica Tsirikou, a shipping markets analyst at Argus. Similarly, secondhand Suezmax tankers are about $130 million compared to $89 million for newbuilds, and Aframax vessels are $95 million versus $75 million. This reflects a significant premium for immediate availability, as owners are reluctant to sell vessels generating strong profits, leading to fewer ships on the market and pushing prices even higher.
