Product tanker newbuilding contracting drops 86% to nine-year low
Summary
Between January and August 2025 product tanker newbuilding contracting dropped 86% year-on-year to 2.6 million deadweight tonnes (DWT), a nine-year low, according to BIMCO. The order book — which peaked at 42.2 million DWT in November 2024 — has since shrunk by 12% to 37.2 million DWT, equivalent to about 19.2% of the product tanker fleet.
LR2s account for 48% of the capacity on order, MRs 37% and LR1s 13%, with the remainder in the handysize segment. Contracting fell across all segments (MRs fared best but still declined 76% y/y). The large order book means a wave of deliveries over the next two years that could put downward pressure on freight rates and encourage recycling of older tonnage.
The product tanker fleet is ageing (average age 14 years) and 20% of capacity is 20 years or older. Low recycling in recent years has created a recycling overhang estimated at up to c.10% of the trading fleet, so there is scope to manage fleet growth via demolition. On the green side, 11% of the current orderbook will be alternative-fuel capable on delivery and a further 22% will be ready for retrofitting; of the capable ships, ~90% are LNG-ready and the rest methanol-ready.
BIMCO notes demand risks too: the IEA expects global refined products demand to grow only marginally in the short term and to peak around 2027 as electrification reduces gasoline and diesel demand faster than growth in naphtha and jet fuel.
Source
Key Points
- Product tanker contracting fell 86% y/y (Jan–Aug) to 2.6m DWT — a nine-year low.
- Order book down to 37.2m DWT (≈19.2% of fleet) after peaking at 42.2m DWT in Nov 2024.
- LR2s: 48% of ordered capacity; MRs: 37%; LR1s: 13%; contracting decreased across all segments.
- MRs performed relatively best but still saw a 76% y/y fall in contracting.
- High upcoming deliveries will add supply and could suppress freight rates and spur recycling of older ships.
- Fleet ageing: average age 14 years; 20% of capacity is 20+ years old; recycling potential exists to manage growth.
- 11% of newbuild capacity will be alternative-fuel capable on delivery; 22% retrofit-ready (mostly LNG, some methanol).
- IEA sees refined-product demand peaking around 2027; electrification will weigh on gasoline and diesel demand.
Why should I read this?
Short and sharp: orders have collapsed but there’s still a big pile of ships coming that could hit freight rates. If you follow tanker markets, fleet planning, chartering or the fuel transition, this is worth a quick read — we’ve done the heavy lifting for you.
