The VLCC market is on fire in 2025, but not everyone agrees on how long the flames will last. Despite whispers of a potential slowdown, the sector is defying expectations with its resilience and strength. According to VesselsValue, the Very Large Crude Carrier (VLCC) segment is showcasing remarkably robust fundamentals this year, fueled by China's insatiable appetite for strategic oil reserves and a historically tight fleet supply. But here's where it gets controversial: can this momentum be sustained in the face of long-term uncertainties? Let's dive in.
Recent rate momentum has been nothing short of impressive, with charter rates soaring to levels not seen since early 2023. This surge is largely attributed to increased buying activity, particularly after Saudi Arabia's strategic price adjustments, and the limited influx of new vessels into the market. VesselsValue Timeseries data reveals that while current values are slightly below last year's 15-year highs, they remain exceptionally strong. For instance, 5-year-old VLCCs with a capacity of 320,000 DWT have seen a steady rise in value, climbing from USD 109.8 million to USD 113.62 million since the beginning of the year.
However, the story isn't all rosy. VLCC sales and newbuilding orders have taken a nosedive, plummeting by approximately 27% year-on-year. In the first nine months of 2024, 113 VLCCs were sold or ordered, compared to just 83 in the same period of 2025. Newbuilding orders have been hit even harder, with only 35 placed so far this year, down from 69 in 2024. This slowdown is largely due to sky-high newbuilding prices, extended shipyard delivery timelines, and lingering uncertainty over future fuel technologies—factors that are making shipowners think twice before committing to new projects.
And this is the part most people miss: despite these challenges, shipowners are holding onto their profitable assets. With earnings at historically high levels, there's little incentive to sell, even as transaction volumes decline. The aging fleet and minimal scrapping activity further tighten the supply, bolstering asset valuations. For example, Dynacom recently purchased four 306,000 DWT VLCC newbuilding resales from Hengli Shipbuilding for USD 118 million each, with a VesselsValue assessment of USD 118.9 million each. Similarly, Seatankers acquired four identical vessels for the same price, valued at USD 120 million each by VesselsValue.
Charter rates have been on a rollercoaster, with one-year timecharter rates for VLCCs surpassing USD 50,000 per day in September—a 12% increase from the previous month. Some spot market routes even hit the USD 100,000 per day mark, a feat not achieved since March 2023. This surge is driven by a combination of seasonal demand, geopolitical factors, and China's aggressive strategic reserve buying, which has coincided with the traditional Q4 uptick in refinery activity. Saudi Arabia's USD 1 per barrel price cut in September further stimulated Chinese buying, as traders sought to hedge against potential supply disruptions.
But here's the million-dollar question: how sustainable is this tightness in the market? With minimal fleet growth, an aging vessel profile, and persistent inefficiencies in ton-mile utilization due to prolonged voyage routes, the VLCC segment has achieved a structural tightness that bodes well for the near term. However, evolving demand patterns and shifting trade dynamics require constant vigilance. Demolition activity remains at a standstill, with only two VLCCs scrapped so far this year, leaving ample room to further tighten supply if rates were to weaken.
Asian buyers, now dominant in the secondhand market, are at a crossroads. Should they invest countercyclically, ride the earnings wave, or selectively upgrade their fleets? Their decisions will play a pivotal role in shaping the market's trajectory. While the VLCC market in 2025 is undeniably strong, with supply-side constraints providing robust support, the long-term outlook remains a topic of heated debate. Are we witnessing a temporary peak, or is this the new normal? Share your thoughts in the comments—we'd love to hear your take on where the VLCC market is headed next.
