Shipping Markets Reach Unprecedented Highs, Future Supply Concerns Emerge

Shipping markets have extended their period of elevated earnings, with Clarksons Research’s cross-sector ClarkSea Index recording its fourth consecutive all-time high on Friday, reaching $75,658 per day. This represents a 14% increase, following a 73% surge over the past month. The index's year-to-date average is 66% higher year-on-year and 84% above its 10-year trend, according to Splash247.

Tankers are identified as the primary driver of this market strength. Average VLCC earnings climbed 10% to approximately $660,000 per day in the past week, while suezmax earnings saw a 72% increase to a record $630,000. Clean MR earnings rose 30% to $64,000, doubling early September levels. VLGC US Gulf-Japan earnings approached $194,000 per day, setting another record. Additionally, one-year charter rates for 6,500 CEU car carriers reached $95,000, surpassing all previous levels outside the 2022-2024 boom.

Bulker earnings, despite easing during China’s Golden Week, remained firm at a weighted $23,062 per day. Containership charter rates are holding at elevated levels due to scarce availability, and LNG spot rates for modern two-stroke tonnage improved to $42,250 per day.

Disruption and Inefficiency Drive Current Boom

The latest surge concludes a record quarter, with the ClarkSea Index averaging $46,384 per day in Q3, exceeding the previous quarterly record of $44,222 set in Q2 2008. The defining characteristic of the current market remains geopolitical disruption. Clarksons estimates crude flows through Hormuz have recovered to about 12 million barrels per day, up from below 2 million barrels per day at their Q2 low. However, the logistics involve significant inefficiency, including shuttle fleets moving oil within the Middle East Gulf for ship-to-ship transfers and longer voyages for Brazilian crude.

Veson Nautical supports this view, attributing an "inefficiency dividend" to ship-to-ship operations, Suez diversions, and extended Atlantic voyages, which are tying up tanker capacity faster than reduced Middle Eastern cargo demand. Veson does not anticipate a full restoration of Middle East oil flows before mid-2027 at the earliest.

Future Supply Response and Asset Values

The significant freight bonanza is prompting a substantial supply response. Veson Nautical reported 198 VLCCs ordered this year, compared to 89 in the entirety of 2025, pushing the VLCC orderbook-to-fleet ratio to 37%. Asset values are also increasing, with five-year-old VLCCs up 70% this year. Clarksons assesses a five-year-old VLCC at $215 million against $131 million for a newbuilding, and a 15-year-old vessel at $160 million.

The ordering trend extends across other sectors. Clarksons noted that 71 million cgt has been contracted this year, aligning with 2007's record pace, and the global orderbook has reached an all-time high of 226 million cgt, up 25% year-on-year. Shipyard output could set new records, potentially reaching 64 million cgt in 2027 and 69 million cgt in 2028, accelerating global fleet growth towards 6% annually.

Poten & Partners highlighted that while Middle Eastern crude to Asia by VLCC cost $1.73 per barrel (3% of delivered crude price) in January, current tanker rates push this to nearly $33 per barrel, representing 27% of the delivered cost. This could influence refiners' crude purchasing decisions and potentially lead to reduced refinery runs if margins erode. Poten concludes that tanker rates should remain strong while crude demand outstrips supply, but could cool rapidly once the oil market loosens.

Clarksons' short-term outlook remains "very strong," driven by the crude tanker market and Middle East disruption. However, the longer-term assessment of shipping requirements is becoming "tricky" as geopolitics intersect with accelerating fleet growth. The industry currently benefits from an exceptional cash position but faces significant future risks.