Market Overview and Fleet Size
In light of the recent announcement by the United States Trade Representative (USTR) regarding Section 301 on February 27, 2025, the global chemical tanker fleet has garnered significant attention, particularly regarding Chinese-built and/or owned vessels. The potentially severe impacts of geopolitical developments have led key stakeholders to reassess the current fleet landscape.
From 2024 to 2025, the number of existing ships rose by over 5% to 5,838. Newbuild orders for 2025 through 2027 total 809 vessels, representing a current fleet orderbook just under 14%. The total deadweight tonnage (DWT) of the chemical tanker fleet is just under 140M. This growth reflects a combination of factors: robust trade volumes, high freight rates incentivizing investment, historically low interest rates, and a prolonged period of underinvestment in the chemical tanker sector. The high freight markets and weak scrap values have resulted in low recycling rates and generally longer trading life for existing vessels.
However, this sharp increase in fleet size could lead to oversupply challenges. Similar trends have been observed in other segments like VLCCs (with a 10% order-to-fleet ratio) and product tankers (20% order to-fleet ratio), where rates have come under pressure due to high order volumes. While the chemical tanker market has experienced remarkable years recently, uncertainties driven by geopolitical risks and fleet expansion cannot be understated.
Geopolitical Landscape and Section 301
The intention of Section 301 is twofold: to support U.S. shipbuilding while targeting China’s dominance in the global shipbuilding industry. This policy directly addresses China’s remarkable transformation from a peripheral player at the turn of the century into the world’s leading shipbuilding nation, capturing the bulk of new orders globally. Chinese shipyards have leveraged government-backed initiatives, such as the military civil fusion (MCF) strategy, to expand their influence across both commercial and naval shipbuilding sectors. This strategic push has positioned the China State Shipbuilding Corporation (CSSC) as the world’s largest shipbuilding conglomerate by revenue and market share. In 2025 alone, China’s newbuild DWT for tankers is
16.7M—a testament to its dominance in global shipbuilding.
The dual-use nature of China’s shipbuilding industry—producing vessels for both commercial and defense purposes—creates an opaque network that complicates oversight. The issue is that foreign companies and governments face significant challenges in understanding how technologies developed for commercial vessels are transferred to naval applications or other industries. The problem is further exacerbated as 75% of all ships (including non-tankers) built in Chinese shipyards are delivered to foreign-owned entities. This results in billions of dollars in revenue being effectively funneled into China’s naval modernization efforts. This dynamic has allowed China to subsidize its naval expansion indirectly through its dominance in global shipbuilding markets, raising concerns among international stakeholders about the broader implications of relying on Chinese-built vessels.
Existing Fleet Composition
The global chemical tanker fleet remains concentrated among three dominant shipbuilding nations: South Korea, China, and Japan. Turkey and Vietnam rank as distant fourth and fifth. These countries together represent the majority of DWT globally, with China leading the charge in newbuild activity. While the United States ranks 14th by its fleet size of 108 existing ships, their gross DWT of these ships leaves the United States with the seventh largest fleet size by gross DWT. Further, the United States has not delivered any tankers since 2017 due to high capital costs associated with domestic shipbuilding. The Jones Act, which mandates that goods transported between U.S. ports must use U.S.-built, owned, crewed, and operated vessels—significantly raises construction and operating costs, often up to four times higher than foreign flagged vessels. Consequently, international imports and exports from the U.S. rely heavily on foreign fleets
to meet demand.
Newbuild Fleet Expansion
The chemical tanker industry is undergoing a significant transformation driven by an unprecedented surge in newbuild orders. South Korea, China, and Japan remain dominant producers, however, China’s shipyards have seen exponential growth due to government prioritization of shipbuilding as a strategic industry. CSSC exemplifies this shift with its dual focus on commercial and defense sectors as mentioned.
In contrast to China’s aggressive expansion, U.S. newbuild activity remains focused on contracting for the Navy or government contracts for naval vessels. Even U.S.-flagged barges have seen only modest growth in recent years. With governmental 56% of stainless-steel chemical tanker orders and 63% of IMO II/III orderbooks currently planned to be built in China, the implications for global trade dynamics are profound. In contrast, the perennial ship building powerhouses of Korea and Japan, while still very much relevant, find themselves engaged mainly in gas tankers and other specialized carriers as they continue to cede market share to China.
Geopolitical Landscape
The Section 301 tonnage tax announced by the USTR in February 2025 has introduced significant uncertainty for major chemical tanker operators reliant on Chinese-built vessels. With Chinese shipyards dominating both existing fleets and newbuild orders in terms of vessel numbers and aggregated DWT, shipowners face substantial risks tied to dependency on Chinese infrastructure. These risks include potential supply chain disruptions stemming from geopolitical tensions or regulatory restrictions targeting Chinese entities.
The ongoing trade war between the United States and China could trigger a reshuffling of global market dynamics, creating opportunities for emerging players outside these two dominant nations. Strategic partnerships may develop in regions historically reliant on Chinese or American-produced goods, which could foster localized production and trade networks. A similar trend was observed when the Red Sea became unsafe for passage following Houthi attacks, leading to a temporary localization of fleets as vessels rerouted around the Cape of Good Hope. However, the scale of the trade war is far greater, with potential ramifications extending beyond regional disruptions. This could result in bilateral trade agreements between countries seeking to reduce reliance on Chinese or American producers.
The implications of Section 301 are severe, particularly with the discussed $1.5 million port call penalty threatening to increase chemical transportation costs by up to 200%. The Houthi attacks previously inflated freight rates due to longer transit times; but with Section 301, the proposal could make certain chemical trades uneconomical.
Company-Specific Overview
Major fleet owners such as Stolt Tankers, Shell, and Odfjell are particularly exposed to penalties under Section 301 due to their control on Chinese-built vessels.
Secondhand Market Trends
The secondhand market for chemical tankers remained exceptionally strong throughout 2024 due to elevated time charter earnings (TCE) averaging ~$29,300/day in 2023 and ~$22,500/day in 2024. High demand for secondhand vessels led to significant changes in ownership structures across the fleet as sellers capitalized on high valuations and firm buyer interest looking to cash in on the strong freight markets. This created a notable shift away from the tonnage provider model to a pure tramp model for speculative owners new to the space.
Proliferation of the Dark Fleet
The dark fleet—with some estimations representing as much as 11% of global tanker capacity—continues to operate outside traditional tracking systems through tactics like AIS disabling, flag-hopping, and opaque ownership structures. These unregulated operations make monitoring difficult while distorting market dynamics. If sanctions against these vessels remain unenforced, their continued operation could depress secondhand values for older tankers often sold into opaque networks at discounted prices. The lack of oversight also creates legitimate concerns about the safety of the crew and the environment. Increased sanctions following the invasion of Ukraine resulted in an increase of the dark fleet further propping up secondhand ship values.
Future Pricing Dynamics
Should geopolitical tensions ease (e.g., a ceasefire involving Russia), there is speculation that over 10% of the fleet may face discounted prices due to oversupply from secondhand transactions. This oversupply would be compounded by an already high orderbook (~14% of current fleet capacity). This compounded effect could have severe ramifications for vessel pricing across both newbuilds and secondhand markets.
- With a ceasefire involving Russia, we’d see an acceleration in scrapping as many ships remain ‘untouchable’ even with sanctions lifted.
- Following a recent period of inflation, elevated prices for ship building will become the new normal, driven by permanently higher steel costs and a higher cost of capital.
Outlook for 2025
As the market weakens, consolidation among fleet owners and operators is expected to increase. Historically, similar trends have emerged during downturns, while stronger markets tend to encourage individual owners to take on more risks. This shift will likely result in a rise of pool-managed as spot earnings decrease amid cyclical market adjustments.
For vessel operators, opportunities will arise through increased tonnage availability as the markets correct. These opportunities will likely come via commercial management arrangements or favorable time charter deals, as secondary and tertiary owner/operators struggle to remain competitive in a lower freight market.
Sustainability trends are reshaping the industry, even as many major producers scale back their green commitments. On the fleet side, eco-friendly technologies such as methanol-fueled tankers and clean ammonia fueled tankers is also being dialed back for LNG, long viewed as a bridge technology only. Regulatory measures like the EU’s Emissions Trading Scheme (ETS) and Fuel EU Maritime initiative have slightly increased transportation costs within Europe. However, momentum for a global emissions trading scheme is waning as climate commitments face setbacks. With the IMO unable to agree on global carbon levies, Europe will likely remain the primary region achieving reduced decarbonization targets in the near term. Despite that, the global fleet will still be required to meet or exceed continually declining emissions targets.
Geopolitical factors are also influencing the market. Section 301 tariffs, though still pending, have already caused significant disruption, with many of China’s new orders either paused or canceled. Meanwhile, South Korea reached an all-time high orderbook value in April 2025, and both South Korea and Japan are nearing capacity. This raises questions about where the next hub for constructing highly specialized tankers will emerge.
In the U.S., domestic shipping remains uneconomical due to the limited size of its fleet. However, a potential solution could involve U.S. companies purchasing second-hand foreign-flagged vessels (excluding those flagged by China) and reflagging them domestically. Government incentives could play a role here, such as special allowances for vessel purchases and subsidies or tax write-offs to offset the higher operational costs associated with U.S.-flagged vessels.
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By Paal Kyrkjeboe
Ship Broker
Quincannon Associates