Supertanker Prices Surge Past Newbuilds Amid Gulf Freight Boom
A surge in freight rates in the Gulf has disrupted traditional ship valuation norms, impacting hull values, war-risk costs, and subsequent claims.
Typically, ships depreciate in value immediately after purchase, much like cars. However, this autumn has seen an unprecedented reversal, with secondhand very large crude carriers (VLCCs) commanding higher prices than new builds.
Supertanker Prices Surge Past Newbuilds
Several supertankers manufactured before 2016 recently sold for $150 million or more, while the average newbuild price hovers around $135 million. One shipbroker described the market as “bananas”.
Data from Clarksons indicates that the benchmark cost of a new VLCC contract was approximately $131 million in early September. Signal Ocean analysts valued five-year-old ships at around $151 million at the end of August, with 15-year-old vessels seeing a 61% annual increase.
This trend is driven by the immediate demand for ships, as new orders face years-long delays due to full shipyards and a swollen order book, which stands at about 38% of the existing fleet, according to Veson Nautical.
Existing ships can start generating revenue immediately, and current rates are exceptionally high. Middle East-to-Asia route rates peaked at about $1.27 million per day earlier this week, per LSEG data. The Baltic Exchange’s VLCC time-charter average reached nearly $723,000 per day on September 18, a significant jump from under $80,000 a year prior.
In a client note, Braemar emphasized that age is now a minor factor in pricing, with delivery speed being the primary concern. The sale of the Pinios, a tanker owned by Dynacom, for nearly $200 million with prompt delivery, exemplifies this shift.
Gulf state oil companies, traditionally reliant on chartered vessels, are now acquiring their own fleets to ensure independence from third-party owners when transiting the Strait of Hormuz. Drewry reports that Abu Dhabi’s Adnoc has purchased at least six supertankers in the past two months. Kuwait’s national oil company and buyers of Iraqi crude are also active in the market.
They compete with South Korea’s Sinokor, which invested about $6 billion in tonnage earlier this year, now owning the world’s largest VLCC fleet. Commodity traders are also buying; Trafigura recently launched Volare Shipping, a 14-ship VLCC company with plans to raise $500 million and list in Oslo in early October.
Alexander Saverys, CEO of CMB Tech, described the market as “once-in-a-generation”, noting that ships can recoup a significant portion of their purchase price within months at current rates.
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Insurance Implications
While much attention has focused on shipowners, the valuation shift significantly impacts the London insurance market in three key areas.
First, war-risk premiums, calculated as a percentage of hull value, increase as hull values rise. Before the conflict began on February 28, Hormuz hull war rates were around 0.15% to 0.25%. Marsh’s Marcus Baker reported they surged to between 3% and 10%. For context, a 5% rate on a $130 million ship totals $6.5 million per transit, while the same rate on a $200 million resale reaches $10 million.
Second, accumulation risk is heightened. A Howden Re report from March estimated the conflict could generate $2 billion to $3 billion in war, terror, and political violence claims, exceeding the segment’s estimated annual global premium of $1.5 billion to $2 billion. Rising hull values exacerbate this overhang.
Third, agreed values in hull and machinery policies, typically fixed at inception, may become outdated in this volatile market. A ship purchased at $175 million but insured at last year’s value could be underinsured. Conversely, if the market collapses, agreed values set at peak prices might far exceed the vessel’s open market value, complicating claims near constructive total loss thresholds.
Additionally, compliance issues have emerged. The US Treasury’s Office of Foreign Assets Control warned of sanctions risks associated with Hormuz passage payments, naming three Iranian-designated entities, including the Persian Gulf Marine Insurance Company. Insurers must now scrutinize both routes and payment trails for tanker business.
Brokers should proactively revisit agreed values, ensuring clients’ fleets are insured at current market rates before renewal. They should also verify increased-value cover for owners who purchased at peak prices and coordinate with lenders to ensure mortgagees’ interest cover reflects current ship values. Stress-testing for potential market crashes and conducting sanctions checks for every Gulf transit are also essential.
The Strait of Hormuz remains largely closed to regular traffic, with ongoing attacks. On September 23, a seafarer was killed when projectiles struck the bulk carrier Cape Dao off Oman. While Iran’s foreign minister has proposed reopening the strait within seven days, Tehran’s security chief insists it will remain closed until Iran’s conditions are met.
Currently, many retain their ships to capitalize on record rates, keeping sale-and-purchase supply low and driving prices higher.
Underwriters must prepare for both prolonged booms and sudden busts. A sustained boom means larger insured sums and war bills, while a rapid decline could leave ships insured for more than their market value. The industry has faced mispriced hull values before, notably after the Russia-Ukraine tanker rally, and such situations rarely resolve quietly.
