Used vessels cost more than newbuilds, raising hopes for shipbuilding supercycle
The Middle East conflict and supply shortages are pushing secondhand vessel prices above those of newbuilds. While some in the industry hope that this reversal will lead to a repeat of the 2007 shipbuilding supercycle, others remain skeptical that it will widen into an all-vessel boom.
The oil tanker Helga is berthed at an offshore oil terminal near Basra, Iraq, on April 24 as it prepares to load crude oil.REUTERS/YONHAP
Secondhand ships are now selling for more than newly built ones in the global market — a reversal stemming from the Middle East conflict.
Clarksons Research put the secondhand vessel price index at 210.97 points and its newbuilding price index at 184.98 in June. The former gauge has risen 7.7 percent this year from 195.96 points in January, while the latter has edged up just 0.4 percent from 184.29.
The difference in demand reflects a scramble among shipowners to secure vessels that they can put to sea right away. As the supply of available vessels is limited and ordering a new ship and waiting for delivery usually takes more than three years, shipowners often prioritize immediacy over price.
GoogleAdmanager-KJD
Additionally, much like in the car market — in which a used vehicle of a sought-after model sells for more than a new car of a different model — a used ship listed in a high-rate freight market can recover its cost quickly, even if the buyer pays a premium.
Several factors have lifted secondhand prices. Even before the onset of the Middle East conflict, much of the global fleet had already aged, and the prolonged Russia-Ukraine war thinned the pool of available ships. As a result, the Iran war sent demand for very large crude carriers (VLCCs) surging.
The reversal is most visible among tankers. A newly built VLCC costs approximately $130.5 million, but a 5-year-old used one trades for $145 million to $175 million. A new Suezmax tanker, a crude carrier of 120,000 to 200,000 deadweight tons (DWT) sized to pass through the Suez Canal, can be bought for $89.5 million, but a 5-year-old version of the vessel runs for about $104 million. An Aframax tanker in the 80,000- to 120,000-DWT class costs $75 million new but about $80 million secondhand.
Vessels in the Strait of Hormuz, as seen from Musandam, Oman, on June 18REUTERS/YONHAP
Such trends in used and new ship prices last occurred during the 2007 shipbuilding supercycle. With rising secondhand prices feeding expectations of new orders and brightening the outlook for Korea’s shipyards, the industry is hoping for another boom.
Even so, some are skeptical that the reversal will widen into an all-vessel supercycle. The price of a new VLCC climbed from $128.5 million to $130.5 million, or 1.6 percent, between January and June. A new ultralarge container ship of 22,000 to 24,000 twenty-foot equivalent units, by contrast, gained just 0.2 percent over the same period, from $261 million to $261.5 million.
“The current overheating in used-ship prices comes from a tonnage shortage centered on crude carriers, such as VLCCs, and from geopolitical risk,” one industry source said. “This is a different picture from 2007, when demand jumped across bulk carriers and container ships at the same time.”
Korean shipbuilders, for their part, are being selective by focusing on high-value vessels.
“Korean shipbuilders already have plenty of orders on their books, so there is no rush right now,” a shipbuilding industry source said. “Rather than simply expanding the order volume, we believe that it is better to maximize profitability by selectively taking on high-value, high-price work backed by advanced technology, such as liquefied natural gas [LNG] carriers, ships powered by environmentally friendly fuels and large floating LNG production facilities.”
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
