The crisis in the Strait of Hormuz is completely upending the long-standing age discount pricing logic in the tanker market. Currently, the transaction price of a merely 5-year-old VLCC has even surpassed the price of newbuild vessels at South Korean shipyards.
According to the latest Tanker Market Monitor report released by Signal Ocean, this asset pricing inversion has spread across all major crude tanker vessel segments. Data shows that the market valuation of 5-year-old VLCCs stands approximately 9 million US dollars higher than the contract price of equivalent newbuilds from South Korean shipyards; secondhand Suezmax prices are nearly on par with newbuilds; and a notable price inversion has also emerged in the Aframax market.
The resale vessel market presents an even more extreme scenario. Buyers are splashing huge sums to secure immediate available tonnage. At present, the premium for resale VLCCs over newbuilds has soared to 45.5 million US dollars, with the overall resale market premium ranging from 21% to 35% above newbuild prices.
Signal Ocean pointed out that under normal market conditions, resale vessels only command a modest premium mainly due to shortened delivery lead times, while 5-year-old vessels should logically trade at a significant discount to newbuilds. However, these two traditional pricing rules have now completely broken down.
Beneath this shift lies a fundamental restructuring of global tanker market dynamics, more than 60 days after the effective disruption of the Strait of Hormuz. Vessel throughput via the strait has plummeted by over 95% compared with pre-conflict levels, forcing an almost complete reshuffle of traditional Middle East export shipping routes.
Shipowners willing to deploy tonnage to Atlantic market routes — particularly those operating cargo loading from the US Gulf to Asia — are reaping substantial premium returns. On the flip side, buyers unwilling to endure the 18–24 month delivery lead time for newbuilds are forced to bid up prices aggressively for spot available vessels.
That said, freight rate signals paint a more complex picture. While tanker freight rates remain at historically elevated levels, Norwegian shipbroker Fearnleys noted this week that VLCC daily earnings are still holding near the $100,000 mark, yet downward market pressure has begun to surface.
Fearnleys highlighted that insufficient cargo volumes are becoming increasingly prominent, putting sustained downward pressure on freight rates.
This pressure is not a short-term fluctuation but a structural issue. Reports indicate a massive backlog of ballast vessels, signalling that the crisis has evolved from a pure geopolitical shock into a demand-side imbalance.
Currently, the ballast sailing ratio for VLCCs has reached around 55%, with Suezmax and Aframax ratios hitting 51% respectively — all three major vessel types have simultaneously breached the 50% ballast threshold.
Signal Ocean’s data reveals a rapidly worsening backlog of ballast VLCCs in the US Gulf, with the average number of idle VLCCs standing close to 60 vessels — a key factor weighing on Atlantic market freight rates in early May.
On a monthly basis, the freight rate index has dropped 34% month-on-month, though it remains 78% higher year-on-year. Meanwhile, the average daily vessel count on the TD22 route has rebounded sharply from a record low of just 2 vessels in early April to over 20 vessels currently.