17 vessels! Order volume hits a 10-year high! Will the VLCC market take off this year?

In the first two months, 17 consecutive orders were placed, setting a 10-year high. The VLCC market, dormant for many years, is taking off again. Facing rapidly growing order demand and persistently high vessel prices, traditional Korean giants, who once had strong competitiveness and construction achievements in this vessel type, have successively returned, and "new shipyards" from China have also entered the market to grab orders.

"Veterans" return! DHT orders up to 8 VLCCs from two Korean shipyards

On February 28, US-listed crude oil tanker company DHT Holdings announced the signing of contracts for the construction of four 320,000 DWT VLCCs with two major South Korean shipbuilding giants. Hyundai Samho Heavy Industries and Hanwha Ocean (formerly Daewoo Shipbuilding) will each build two vessels, with deliveries expected sequentially from April to December 2026. This contract also includes an option for an additional four vessels, which, if confirmed, can be delivered in the first half of 2027రికిన్

DHT stated that the average cost of these new vessels reached USD 128.5 million per vessel. They will feature high-specification, brand-new eco-friendly designs to enhance profitability by improving fuel efficiency, reducing emissions, and increasing carrying capacity. The new vessels will be equipped with exhaust gas cleaning systems, meet Tier III standard requirements, and hold multiple alternative fuel-ready class notations, further boosting the efficiency of DHT's fleet.

Commenting on the latest orders, Svein Moxnes Harfjeld, President and CEO of DHT, stated: "We have secured highly competitive delivery slots in advance to build the most efficient and highest quality vessels on the market. We hope our customers can continue to enjoy safe, efficient, and reliable crude oil transportation through DHT."

It's worth noting that the single-vessel price of this DHT order set a 16-year high for VLCC construction costs. If all optional orders are confirmed, the total value of DHT's 8 VLCC orders will reach USD 1.028 billion (approximately RMB 7.396 billion).

This order from DHT Holdings is highly significant, not only marking the return of HD Hyundai Group and Hanwha Ocean, two former "leaders" in VLCC construction, after three years, but also being DHT's first new shipbuilding order in the past seven years.

Previously, Hanwha Ocean announced on February 23 that it had secured orders for two VLCCs from an Oceania shipowner. HD Korea Shipbuilding & Offshore Engineering, the shipbuilding business holding company of HD Hyundai, also disclosed orders on February 28. However, neither shipyard revealed the shipowner's information.

Clarkson's data shows that the last time Korea Shipbuilding & Offshore Engineering and Hanwha Ocean took VLCC orders was in 2021. Specifically, in April 2021, ADNOC Logistics & Services (ADNOC L&S), a subsidiary of Abu Dhabi National Oil Company (ADNOC), ordered one LNG dual-fuel VLCC from Hanwha Ocean. In June of the same year, Frontline ordered three VLCCs from Hyundai Samho Heavy Industries. All these new vessels were delivered last year.

Since 2022, Korean shipyards have collectively "disappeared" from the VLCC newbuilding market, focusing on securing orders for higher-value, more in-demand large LNG carriers and container ships.

  Korea Shipbuilding & Offshore Engineering and Hanwha Ocean possess overwhelming competitiveness in the VLCC construction sector and once dominated this market. Among them, Korea Shipbuilding & Offshore Engineering has accumulated rich experience and strong technical capabilities in VLCC design and construction, having received nearly 800 VLCC orders since taking its first in 1972. Of the 925 VLCCs currently operating globally, 185 were built by Hanwha Ocean, giving it the world's largest market share.

Furthermore, DHT's last VLCC order was in early 2017, when the company ordered two 318,000 DWT VLCCs from Hyundai Heavy Industries. These two new vessels were delivered and commenced operations in 2018.

DHT's fleet currently operates 24 VLCCs, and the company is confident about the future VLCC market. DHT believes that the current VLCC vessel supply outlook is very constructive, with existing orderbook accounting for less than 3% of the fleet, and available delivery slots are extremely limited in the coming years, with potential delivery slots facing fierce competition from other vessel types.

With new vessel orders extremely limited, the VLCC fleet is also rapidly aging. By the end of 2026, nearly 50% of vessels are expected to be over 15 years old, and over 20% will be more than 20 years old. Meanwhile, an estimated 160 VLCCs with an average age of 21 years are involved in sanctioned trade, limiting their commercial opportunities in compliant markets and trade. International Maritime Organization (IMO) environmental regulations will increasingly restrict the efficiency of older vessels, potentially forcing these older ships to slow down to meet lower emission targets, which will also reduce available capacity supply.

"Newcomers" enter! VLCC "order boom" arrives, new orders in first two months hit 10-year high.

In recent years, due to high newbuild prices and weak market freight rates, the VLCC construction market has faced an "order drought." New VLCC orders were 31 in 2021, plummeting to just 3 in 2022, the lowest level on record. Although it recovered to 18 last year, it remains historically low. As of now, the VLCC orderbook stands at only 23 vessels, accounting for just 2.56% of the existing fleet.

Industry analysts state that the global VLCC fleet has entered a state of deep aging, with vessels aged 20 years or more accounting for 14.1% of the global VLCC capacity. Concurrently, as new international maritime regulations are continuously strengthened, the scrapping of older VLCCs will increase, thereby potentially initiating a new wave of VLCC newbuilding orders.

In fact, new VLCC orders have significantly increased in the first two months of this year. Clarkson's data shows that as of now, new VLCC orders this year have reached 17 vessels, nearly 8 times higher than the same period last year, and also setting a new high for orders in the first two months over the past decade. In contrast, in the first two months of last year, only Mitsui O.S.K. Lines (MOL) ordered 2 VLCCs from Dalian COSCO KHI Ship Engineering (DACKS), which was the only VLCC order globally in the first half of last year.

Meanwhile, from the perspective of the Clarksons Newbuilding Price Index, the construction cost of VLCCs has increased by over 40% in the three years since 2021. Therefore, VLCCs, along with LNG carriers and Very Large Ammonia Carriers (VLACs), are regarded by the industry as new high-yield vessel types.