Oil Tanker Sales Drop on Higher Prices, Weaker Demand from China

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Written by Paul Wiseman for Industrial Info Resources (Sugar Land, Texas)--Sales of all types of oceangoing oil tankers dropped precipitously in fourth-quarter 2024, according to data from Veson Nautical, a global provider of shipping logistics software. High ship prices, combined with weak demand from China, the world's largest oil importer, along with concerns over tariff threats from the incoming U.S. administration, are among the downward forces, according to the Veson report.

Veson tracks sales of the main tanker types. That includes, in order of size from large to small, by deadweight tonnage (DWT): Very Large Crude Carrier (VLCC), 200,000-320,000 DWT); Suezmax (120,000-180,000 DWT); Aframax (75,000-120,000 DWT); Panamax (50,000-75,000 DWT); and Medium Range (MR) (25,000-50,000 DWT).

Of those, only the Suezmax increased in sales from the third quarter (21) to the fourth quarter (+28). Total sales in these five categories dropped from 222 in the third quarter to 73 in the fourth quarter. In particular, MR sales went from 110 in the third quarter to 25 in the fourth quarter. Total sales have been trending down since early 2023. In first-quarter 2023, sales totaled 305 vessels, bottoming with fourth-quarter 2024's sales of 73 vessels.

Total time charter (TC) rates, which are the fixed daily rates paid for vessel use, figured in U.S. dollars, have dropped slightly over the last month, which Veson said is not in itself indicative of a weak market. But, the report said, "uncertainty remains" regarding possible changes in U.S. policy and global demand questions, especially those in China.

Costs Float Higher
One thing putting downward pressure on sales is that values for large tankers "have remained at around 15-year highs for most of this year," the Veson report said, listing the value of a 10-year-old VLCC at just under 9% higher than this time last year. But, Veson noted, the slowdown in sales resulted in a drop in prices in the last month.

China Growth Stops
A September report by the International Energy Agency (IEA) said that Chinese demand for oil through July had been in decline, compared to 2023 numbers, for four months, dropping much more precipitously than expected. In a later report, the EIA said November demand had dropped by 2.1% compared to the same month in 2023. This "abrupt deceleration in Chinese oil consumption" was a major factor in cooling the world's overall demand growth from levels seen in recent years.

These numbers are what the IEA called "a marked contrast" to 2023, when China had an average growth of 9.6% compared to 2022.

Geoffrey S. Lakings, an IIR Energy senior analyst, noted China's big move toward electric vehicles (EVs) and plug-in hybrids accounted for more than 50% of the nation's vehicle sales this year, reducing gasoline demand. And for trucking, China has begun replacing diesel with liquefied natural gas (LNG) as a fuel. The IEA said it sees these changes displacing about 400 000 barrels per day (BBL/d) of oil demand growth this year alone.

Industrial Info is tracking several refineries in China are in the process of closing at least part of their capacity between 2024 and 2025. In light of the changes in vehicle sales trends, S&P Global Commodity Insights projects that the country's gasoline and diesel demand have already peaked.

What About LNG Shipping?
LNG exports from the U.S. to China, on the other hand, have been up and down since the U.S. Congress began allowing LNG exports in 2015. The U.S. Energy Information Administration (EIA) reported that 2021 saw the highest number, at 453,304 million cubic feet (MMcf) for that year. In 2023, the U.S. sent China 173,247 MMcf of LNG.

While the increase in LNG demand may be bad news for oil tankers, it's great for LNG vessels. Earlier this year, Veson reported that the number of LNG carriers' newbuilding orders (78) were up by 129% compared to the corresponding period in 2023 (34).

Recent data show that the U.S. was the top LNG exporter in the world in 2024, marking the second consecutive year of leadership.

Should the incoming Trump administration in the U.S. undo the moratorium on reviewing and approving new LNG terminals, more LNG could flow in future years, creating additional demand for LNG vessels.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking more than 200,000 current and future projects worth $17.8 trillion (USD).