Internatonal Seaways focused on replacing aging fleet during second quarter: CEO

Tanker operator International Seaways spent the second quarter replacing a portion of its aging fleet, as order books grew to about 11% of its total fleet, with seaborne activity bolstered by increased demand paired with ongoing disruptions to oil markets, the company said Aug. 7.

"Strong tanker market naturally would dictate more ordering and the order book has grown to about 11% of the total fleet," CEO Lois Zabrocky said during the company's second quarter earnings call. "However, ships on order are not enough to replace a fleet that is aging significantly."

Today, the average age of the tanker fleet is over 13 years old and is "likely to get older with so few newbuilding deliveries."

International Seaways took delivery of six eco MR's while selling three vessels aged 15 years or older, which lowered its average MR age by one year. By mid-July, the tanker operator closed on one out of three of the vessel sales.

"In general, older ships have less efficiency and utilization," Zabrocky said. "With a greater percentage of the fleet in this vintage, the industry needs more shifts to cover the increase in seaborne demand."

Total oil demand is expected to grow by 1.7 million b/d in 2024, with growth focused in China, India and other major Asia oil demand centers, according to analysts at S&P Global Commodity Insights.

"We expect oil demand to continue to grow at a rate above its 30 year average growth, with a good portion of the growth regionally in Asia which has grown slower than expected at the beginning of the year," Zabrocky added.

The company expects no more than 2 million b/d of oil demand growth in 2024, expecting it to land in a range between 1 million and 1.5 million b/d.

Referencing both tanker supply disruptions and geopolitical risks, crude tanker demand is expected to grow by 8%-9% in 2024 and decrease 3.5%-4.5% in 2025, according to BIMCO's Tanker shipping Market Overview and Outlook published in May.

According to the report, crude tanker demand is forecast to outpace supply in 2024 but grow slower than supply in 2025 as ships potentially return to the Suez Canal and sailing distances shorten.

Product tanker demand is forecast similarly, to increase between 5%-6% in 2024 and decrease 3%-4% in 2025.

The company reported 47% of fixtures booked at approximately $373,000/d, with VLCC's averaging $46,400/d during the second quarter while Suezmax and Aframax rates averaged at $45,000/d and $31,500/d, respectively.

LR1 and MR spot fixtures averaged at $53,100/d and $35,000/d respectively over the same period.

The Platts 70,000 mt US Gulf Coast-UK Continent freight assessment from S&P Global Commodity Insights averaged $50.14/mt in January 2024, up from $43.21/mt in the fourth quarter of 2023 and a $28.21/mt average in the third quarter of 2023.

Platts, a part of Commodity Insights, assessed freight for the 70,000 mt US Gulf Coast-UK Continent route for loading Aug. 12-27 at w120 Aug. 7, exclusive of EU Emission Trading Systems costs, reflected at w5 premium, down w0.25 from Aug. 6, for average-lifting tonnage.

Platts assessed freight for the 270,000 mt VLCC US Gulf Coast-UK Continent route for the typical loading dates of Aug. 22-Sept. 21, at lump sum $2.69 million Aug. 7.

Freight for the 270,000 mt VLCC US Gulf Coast-China route for the typical loading dates of Aug. 22-Sept. 21 were assessed at lump sum $6.85 million Aug. 7.