GTHT has released a research report indicating that tight berth availability over the coming years will create a supply bottleneck, leading the firm to maintain its Overweight rating on the tanker shipping sector. The market had already entered a supercycle before the Middle East conflict, and during the conflict, war risk premiums, regional disruptions, and efficiency losses drove freight rates to record highs. With the medium-term prospect of the Strait’s reopening, tanker supply-demand dynamics are expected to return to elevated levels, while restocking demand and long-haul control further bolster the outlook, supporting strong profitability over the next two years.
Additionally, geopolitical factors provide an upside option for unexpected demand, and tight berth availability offers a supply-side constraint. The firm believes the high prosperity of the tanker shipping sector is likely to exceed expectations in its duration. Over the past five years, the shipping industry has experienced successive upturns in different sub-sectors, leading to sequential order placements that have driven sustained high activity in shipbuilding. It is anticipated that capacity constraints in the current shipbuilding cycle will be more favorable than the previous one, and a wave of VLCC orders in 2026 will continue to ensure the shipbuilding boom persists.
Core viewpoints from GTHT include: Over the past five years, the shipping industry has seen a sequential rise in prosperity across sub-sectors, prompting a cascade of orders that has kept the shipbuilding sector highly active. Historically, the shipping cycle has twice driven the shipbuilding cycle. The first instance began in 2002 with China's WTO entry, economic rise, and urbanization, which fueled sustained strong shipping demand and a synchronized boom across dry bulk, container, and tanker segments. Shipowners' consensus expectations of sustained prosperity triggered an order wave starting in 2006, driving the shipbuilding upturn. From 2009 to 2019, shipping prosperity rapidly declined and remained subdued, with shipbuilding capacity peaking two years later and undergoing capacity rationalization and industry consolidation, leaving a profound and lasting impression on the industry.
In the current cycle, over the past five years, shipping sub-sectors have seen a sequential recovery, with significant orders placed for container ships, LNG carriers, ro-ro vessels, product tankers, and crude oil tankers. The rising order coverage at shipyards underpins the high shipbuilding activity. Compared to the previous cycle, capacity constraints in the current shipbuilding sector are expected to be more favorable, with a more robust and sustainable upturn.
Shipyard order coverage: Since 2026, order coverage has remained at elevated levels, with new orders scheduled as far out as 2030. Over the past five years, shipyard order books have grown rapidly, while shipbuilding capacity expansion has been relatively slow and restrained. As a result, order coverage (order book divided by past-year deliveries) has continued to rise, exceeding four years at global shipyards as of mid-2024 and surpassing five years at Chinese shipyards by mid-2025. This level remains high in 2026, with new orders currently scheduled into 2030. The improved order coverage supports the shipbuilding upturn, with the newbuilding price index steadily rising since 2021, approaching the previous cycle's peak (August 2008) by Q3 2024 and remaining largely at high levels through 2025-26.
Newbuilding prices by vessel type may reflect differences in shipowner ordering intentions: large container vessels (10,000+ TEU) have surpassed the previous peak and remain well above it in 2026; MR product tankers are roughly flat at the prior peak; VLCC crude carriers have risen steadily over the past year; and dry bulk carriers still remain below the prior peak.
New vessel orders: A wave of VLCC orders is expected in 2026, further ensuring the shipbuilding boom continues. Given aging vessel replacement needs and environmental regulatory requirements, significant new orders are expected in the coming years. Based on long-term industry observation, return-on-investment expectations are the key driver for shipowner ordering decisions. Container shipping companies have maintained ordering intent through economies of scale in vessel size. Tanker and dry bulk shipowners generally assess investments using per-vessel return models, making freight rate expectations central. By mid-2026, the industry-wide order book ratio is projected to rise further to 21.7%, with container ships, crude oil tankers, product tankers, and dry bulk carriers at 39.8%, 27.6%, 20.3%, and 14.2%, respectively.
Since the start of 2026, crude oil tankers have seen an order influx, with 168 new VLCCs ordered, primarily led by European shipowners. Currently, there are 930 VLCCs globally, of which 169 are sanctioned and 21% are older than 20 years. Considering that an additional 26% of VLCCs will exceed 20 years of age in the next five years, new deliveries will only ensure a basically stable supply of compliant tonnage in mainstream markets. Geopolitical conflicts since 2026 have driven tanker freight rates to new highs, with five-year VLCC time charter rates exceeding $50,000 per day. If tanker and bulk shipowners reach a consensus on sustained high prosperity, traditional owners may continue to place orders on a larger scale.
Tight berth availability provides a supply bottleneck in the coming years, supporting the Overweight rating on tanker shipping. The market had already entered a supercycle before the Middle East conflict. During the conflict, war risk premiums, regional disruptions, and efficiency losses drove freight rates to record levels. With the medium-term prospect of the Strait reopening, tanker supply-demand dynamics are expected to return to elevated levels, with restocking and long-haul control adding further upside, supporting strong profitability over the next two years. At the same time, geopolitical factors offer an upside option for unexpected demand, and tight berth availability provides a supply-side constraint. The firm believes the sustainability of the tanker shipping upturn could exceed expectations.
Risks: Geopolitical conflicts, economic downturns, industry regulation, and weaker-than-expected implementation of environmental policies.