The product tanker market is set for a significant shake-up in 2025, with newbuild deliveries projected to surge to 12 million deadweight tonnes (DWT). This marks a staggering 256% increase from the 3.4 million DWT delivered in 2024, reaching a 16-year high and the second-highest level on record. While this influx of new tonnage suggests a fleet expansion, the industry must critically assess whether it signals sustainable growth or a looming market imbalance.

The sharp rise in deliveries stems from a surge in contracting activity during 2023 and 2024, when 551 new ships—totaling 38.7 million DWT—were ordered. This represents a dramatic increase from the previous decade’s annual average of 122 ships (7.3 million DWT). As a result, the order book has swelled from 10.6 million DWT at the start of 2023 to 41.2 million DWT by early 2025, pushing the order book-to-fleet ratio from 6% to a striking 22%.

Market Dynamics: Overcapacity Risk Looms

The influx of new vessels is led by the Medium Range (MR) and Long Range 2 (LR2) segments, which dominate both contracting and delivery schedules. In 2025, 98 MRs and 52 LR2s are expected to enter the market, adding 4.9 million and 6 million DWT, respectively. This will increase DWT capacity by 2% for Handysize, 6% for MR, 3% for LR1, and 12% for LR2 tankers. However, such aggressive fleet expansion raises concerns about a potential supply-demand mismatch, particularly if oil demand growth slows as anticipated.

Decarbonization Efforts Still Lagging

Despite the surge in new orders, the shipping industry continues to lag in its transition to alternative fuels. Of the vessels scheduled for 2025 deliveries, only 7% will be capable of running on alternative fuels, with another 12% designed for future retrofitting. This falls short of expectations for a sector under increasing regulatory pressure to decarbonize. Across the broader order book, just 11% of vessels will be equipped with alternative fuel capabilities, reflecting the industry’s slow adoption of greener technologies.

Aging Fleet and Geopolitical Disruptions

While newbuild deliveries accelerate, recycling activity remains sluggish. Over the past five years, minimal scrapping has pushed the average fleet age up by more than 2.5 years. Today, 10% of the fleet’s capacity consists of tankers older than 20 years, yet there is no clear momentum toward phasing out aging vessels. Market dynamics, compounded by geopolitical risks—including ongoing Russian sanctions and Houthi attacks in the Red Sea—could further delay the retirement of older tonnage, sustaining a bloated fleet and delaying efficiency gains.

Conclusion: A Fragile Equilibrium

Industry experts project fleet growth of 5-6% in 2025. However, if oil demand growth underperforms, the sector could face overcapacity, pressuring freight rates and reducing profitability. The combination of rapid fleet expansion, slow recycling, and inadequate decarbonization progress signals a fragile equilibrium that the industry must navigate carefully. Without strategic fleet management and accelerated investment in green technologies, the tanker market could be heading toward turbulence rather than stability.