My favorite tanker company, Frontline (FRO) announced their Q2 2026 results. Their company management typically have some great insights on the tanker market. This time, not as vivid as when they announced Q1 2026 results. So some points,
- The hypothetical rate for (former) benchmark VLCC route - TD3C (Gulf Region to China) is around $600K daily. Again, hypothetical, as there is little, to no-traffic, on the route.
- China has stopped exporting petroleum products. The country is tapping its major SPR (Strategic Petroleum Reserves). How much is being used - that’s more of an unknown.
- FRO recently sold a pair of 9-year-old VLCCs for a massive profit. An analyst questioned the decision given VLCC rates are over $100K daily. FRO mgmt responded (paraphrasing here) - Well, we did the analysis, and realized that the vessels would have to operate 9.5 - 10.5 years @ $70,000 daily, to get the same return as FRO received by selling @ $135M each. Charterers usually pay a lower rate once a vessel passes the 15 years mark.
- As a follow-on to the above, there was a slew of VLCC orders the first half of the year, but ordering seems to have tailed off. Among other reasons, delivery timeline has shifted from 2.5 years to 3 - 3.5 years.
- Although VLCC spot rates are very high, FRO mgmt admit that they don’t have a crystal ball. They don’t know how long those rates will last. Given that, they have fixed quite a few VLCCs, including two multi-year charters, with the first year @ $110K daily. (Spot rates are high on other tanker types, but I haven’t seen time charter rates quoted as frequently).
- Interesting point on vessel scrapping. It is usually quoted in dollars and represents a logistical issue to some deals being done.