Pools operator Tankers International has highlighted compliance concerns over increased dry-dockings of elderly VLCCs operating in sanctioned oil trades.
The past couple of years have seen a notable uptick in yard maintenance activity for these ships, it noted, as the so-called “shadow fleet” has grown.
Tankers International’s data shows more than 40 VLCCs above 18 years of age were dry-docked in 2023.
Such ships made up just a fraction of 25 VLCC dry-dockings in the first quarter of 2022 before the Ukraine war started.
By the last three quarters of 2023, this had grown to about one-quarter of between 50 and 60 VLCCs dry-docked in each three-month period.
The proportion has remained the same in the first quarter of 2024, although total dockings were down below 40.
“Traditionally, older vessels nearing the end of their operational life would be scrapped for parts or metal,” Tankers International said.
“However, the emergence of the shadow fleet, a collection of older tankers operating outside of traditional regulations and oversight, appears to be altering this dynamic.”
Owners are being incentivised to run ships for longer by the increased profitability of sanctioned cargoes, the London-based operation argues.
Unique challenge
“The high cost of a dry-dock is often seen as a precursor to scrapping, but in the current climate, it seems that some owners are opting to extend the life of their assets and capitalise on the shadow market,” it added.
The UK company views the trend as presenting a unique challenge for the industry.
“The shadow fleet raises concerns about safety and environmental compliance,” it said.
“Classification societies and regulatory bodies have withdrawn their support for vessels trading in sanctioned trades, as has the insurance community.
“This means less oversight on maintenance and assurance that minimum operating standards are met.”
The pools operation admits that part of the trend could also be explained by the highly positive outlook for mainstream tanker markets in the next couple of years.
“We, and many other market stakeholders, are confident that a combination of limited fleet growth and expanding tonne-mile demand for large crude tankers will support a healthy freight environment in the medium term, leaving owners to want to hold on to tonnage that might historically be divested,” Tankers International explained.
It said some mainstream shipowners have dry-docked elderly VLCCs.
“However, in the time frame covered, we note that 80% of the vessels that went through a dry-dock aged 18 and older are being traded in the shadow fleet.
“This would suggest that the dry-docking trend of the older fleet is predominantly driven by the rise in the shadow market.”
