Old Tanker Values Reappraised Amid G7 Price Cap
The G7 price cap, introduced in December 2022, has had a profound impact on the secondhand tanker market, with values increasing by as much as 123% for certain vessels. This re-rating is not limited to crude tankers alone, but applies to almost everything floating, including product tankers and bulk carriers.
According to data from the Clarksons Shipping Intelligence Network (SIN), a fifteen-year-old aframax – a vessel size that physically lifts Russian barrels out of the Baltic and the Black Sea – carried a premium of about $17.7m in the 39 months after the cap, above what earnings, oil prices, the freight cycle, and recession conditions jointly predict.
Everything Floating Re-Rated
The data reveals that almost everything floating re-rated after 2022, including a 10-year-old LR2 product tanker, which picked up $16m. Even handysize bulkers, with no crude exposure of any kind, gained 85% over their own baseline. This challenges the common assumption that only crude tankers jumped in value.
Ordered by Age and Route
The premium climbs with vessel age in every segment, and the steepness of that climb is ordered by exposure to the Russian trade: roughly 3.7% per year of age for aframaxes, 2.8% for suezmaxes, 1.8% for VLCCs. This suggests that the sanctions signal lives on, even as the market adjusts to new conditions.
The Term Structure Tells the Same Story
The five-year to 15-year price ratio, which had oscillated around a long-run mean of roughly 2.0–2.2 since 2008, averaged 2.54 across 2018–21 and then compressed to 1.76. Old ships repriced proportionally harder than modern ones, and did so while values across the board sat at or near records.
A General Shipping Boom Does Not Sort Itself
A sanction that makes cheap, disposable, G7-disconnectable tonnage the bottleneck in a newly valuable trade does exactly that – sort itself by build year and loading terminal. The date the data picks on its own is December 5, 2022, when the G7 price cap was introduced.
The findings of Simon Lunde and Fredrick Henriksen of BI Norwegian Business School, published in their recently released paper, highlight the significance of the G7 price cap in re-rating old tanker values. As the market continues to adjust to new conditions, it is essential to understand the impact of this sanctions-driven development on the shipping industry as a whole.
Original Article: What the price cap did to old tanker values — Splash247