Crude tanker scrapping: The calm before the storm

Although the pool of demolition candidates based on age is very high at the moment, the pace of scrapping activity will hinge on regulatory pressure, tanker freight rates and the employability of old tonnage in the grey trade.

Geopolitics and the shadow fleet

The surge in older tonnage entering the grey trade has artificially prolonged the lifespan of many crude tankers in recent years, thereby curbing demolition activity. Sanctions on crude exports from countries such as Venezuela, Iran and Russia have fuelled demand for aging vessels in shadow operations—a primary reason for the weak scrapping activity.

Source: Drewry Maritime Research

However, potential shifts in the geopolitical landscape could significantly reduce the scale of the grey trade, undermining the employability of older tonnage and paving the way for increased scrapping. For instance, the removal of Venezuela from sanctioned trades has already eliminated substantial demand from the grey trade, eroding the utility of the shadow fleet of VLCCs. Similarly, the temporary easing of sanctions on Iranian and Russian crude exports has further reduced the employability of these vessels. A permanent lifting of sanctions on Iran following a peace agreement would severely contract grey trade, accelerating the retirement of shadow fleet tonnage by 2027. Even if sanctions were to be lifted, many of these vintage vessels would struggle to re-enter the legal trad without costly retrofits. Conversely, if US sanctions on Russia were to be reinstated, a significant portion of the dark fleet would remain active, thereby limiting overall scrapping activity.

Influx of fresh tonnage

Beyond the shadow fleet, mainstream older vessels will also face mounting pressure over the next two-to-three years due to the influx of newbuilds. The recent surge in ordering reflects a clear ramp-up in fleet renewal. Improved liquidity among crude tanker owners—driven by sustained high earnings—has encouraged a wave of new orders in 2026. Owners are simultaneously capitalising on attractive valuations for older tonnage to fund fresh acquisitions.

Source: Drewry Maritime Research

In the first five months of 2026 alone, 178 crude tankers were ordered, including 112 VLCCs and 63 Suezmaxes—surpassing 152 crude tankers ordered in full-year 2025. As a result, the orderbook as a share of the fleet has risen from 16% at the end of 2025 to 25% by May 2026. Delivery schedules point to a surge in new tonnage entering service during 2027–28. These modern, fuel-efficient vessels will quickly erode the charter appeal of older, less compliant ships, driving scrapping activity higher.

Charter rate outlook

In the near term, vessel earnings are expected to remain attractive through the remainder of 2026, particularly if traffic through the Strait of Hormuz improves. Increased restocking activity and repositioning to the Arabian Gulf will sustain high utilisation, keeping scrapping subdued. However, as supply inefficiencies fade, crude tanker rates are projected to decline in 2027 from their 2026 highs. Rising tonnage demand, supported by improved oil supply and stocking activity, will moderate the fall in rates, resulting in only a modest increase in scrapping. By 2028, however, continued fleet expansion coupled with slowing demand growth will weaken utilisation, depress rates and trigger a sharp rise in demolitions.

Regulatory compliance and maintenance costs

Aging vessels face declining efficiency, higher fuel consumption and elevated greenhouse gas emissions. With the costs of mandatory special surveys looming, many owners will find scrapping more economical than retrofitting to meet stricter environmental standards. The implementation of the IMO’s Net-Zero Framework on 1 January 2028, combined with the influx of new tonnage, is expected to catalyse a significant surge in scrapping activity.