Between January and August, product tanker newbuilding contracting “dropped 86% y/y to 2.6 million deadweight tonnes (DWT) representing a nine-year low,” says Filipe Gouveia, Shipping Analysis Manager at BIMCO.
The decline reverses the boom of 2023 and 2024, when LR2 and MR ships dominated the order book and a pick-up in LR1 contracting stood out as that segment’s fleet had been shrinking this decade.
The order book peaked 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%. LR2s currently account for 48% of DWT on order, MRs for 37% and LR1s for 13%, with the remainder in handysize.
Contracting fell across all segments; MRs performed best but still declined 26% y/y.
“Despite the slowdown in contracting, the order book remains large at 37.2 million DWT, equivalent to 19.2% of the product tanker fleet. 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,” says Gouveia.
A chart in the release credits Clarkson Shipping Intelligence as source data for contracting levels.
Fleet renewal is set to benefit from the high number of scheduled newbuild deliveries.
The fleet has been aging since 2011, with the average product tanker now 14 years old. Low recycling in recent years has contributed to aging and 20% of fleet capacity is provided by ships 20 years old or more.
Relative to historical norms, the current “recycling overhang” is estimated at up to 10% of the trading fleet, indicating scope to manage future fleet growth through removals.
Regarding fuels, 11% of contracted capacity will be capable of using alternative fuels upon delivery and another 22% will be ready for future retrofitting.
Of the capable ships, 90% will be equipped to use LNG and the rest methanol. “Product tanker contracting could remain low in the near term amid the large orderbook 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,” says Gouveia.
BIMCO is an international shipping association that represents shipowners, operators, managers, brokers and agents. It publishes market analysis and industry commentary and develops standard contracts and clauses for maritime trade.