The value of old supertankers exceeds that of new builds as the market goes “banana”

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The value of older supertankers has surpassed new ships for the first time according to brokers’ records, as shipowners rushing to take advantage of high freight rates in the Gulf contribute to a “banana” market for big crude carriers.

Prices for five- and 10-year-old ships have soared, with deals being signed in days rather than weeks as brokers rush to secure the first available vessels. Record Middle East-to-Asia freight rates for so-called very large crude carriers — supertankers that carry 2 million barrels — of $1.2 million a day are driving up ship prices.

A shipbroker working on supertanker deals described the market as “banana”. Over the past week, several ships built before 2016 sold for $150 million or more, compared with an average of $135 million for newbuilds, brokers said.

“In 50 years we will be talking about 2026. It’s really extraordinary. I don’t think in my lifetime I will see this kind of market again. It’s once in a generation,” said Alexander Saverys, managing director of Belgian shipping company CMB Tech, which has several ships on the Middle East route.

In a note to clients, shipbroker Braemar said prices were now determined by how quickly a vessel can be delivered to its new owner. “Ship age has remarkably little influence on prices today,” he said.

Ship ownership data shows that a recently built tanker, owned by Greek billionaire George Prokopiou’s Dynacom, was sold on “prompt delivery” for $200 million – one of the highest prices on record. Another ship to be delivered in October brought in $169 million. Overall tanker values ​​have increased by a third compared to the same period last year.

A key driver of demand has been the desire of state-owned Middle Eastern oil companies to own their own fleets, giving them greater control over exports from the Gulf. Historically, national oil companies have chartered ships from other shipowners, leaving them dependent on others if they wish to navigate risky areas such as the Strait of Hormuz.

Shipbrokers said market players included Kuwait’s national oil company and buyers looking for vessels to ship Iraqi crude. UAE state-owned energy group Adnoc has purchased at least six supertankers in the past two months, according to maritime consultancy Drewry.

With freight rates at such astronomical levels, the return on investment on purchasing a vessel can be realized within months, Saverys said. “You can save $100 million over six months, so by buying your asset at $175 million, ultimately, philosophically, you’re buying a $75 million ship.”

The Gulf countries are taking on South Korea’s Sinokor, which currently dominates the tanker market, having purchased around $6 billion of tonnage earlier this year.

Traders such as Trafigura, which announced the listing of a supertanker business last week, have also been buying supertankers this year in a bid to better control commodity movements and protect margins.

“You never know if you’ll get the freight rate you started with that day – freight rates (change significantly every day),” said Rajesh Verma, deputy director of tanker transportation research at Drewry.

Because of the strong market, many shipowners have been evaluating their fleets and deliberating whether to sell their vessels, brokers and owners said.

But many supertanker owners are hesitant “because they want to take advantage of record rates,” said George Macheras, head of global maritime at law firm Watson Farley & Williams. This led to a shortage of ships in the market, further driving up asset prices.

Several shipowners have warned of an upcoming crash if a peace deal is reached that reopens the strait.

But even if freight rates suddenly fell, they would remain structurally higher than in previous years, Macheras said.

“If the market corrects to 200,000 euros per day, which may not be the case in two to three months, you will still make money,” he said.