VLCC earnings at 14 times their 10-year average — and the industry is nervous

VLCC earnings this month are running at 14 times their 10-year average, with the weekly multiple closing in on 20. That calculation, from Arrow head of research Burak Cetinok, set the tone at yesterday's Maritime CEO Forum in Monaco, where shipowners debated whether wartime riches are breeding the next bust.

The rally, Cetinok told delegates at the Yacht Club de Monaco, is unusually broad — spanning freight, vessel values and sale-and-purchase activity. The latest peak stands four times higher than the 2007-08 boom. For context, that previous cycle ended in the most notorious asset collapse in modern shipping history.

What does the money actually look like?

Cetinok doesn't see an immediate sell signal in conventional shipping. His worry is capacity. Arrow's analysis shows that once an orderbook reaches roughly 25% of the existing fleet, earnings have historically fallen within 24 to 36 months. That's a two-year fuse, give or take.

DHT Holdings chief executive Svein Moxnes Harfjeld was calmer about the VLCC orderbook, and with numbers to back it. By the end of 2029, he said, almost half the VLCC fleet will be over 15 years old and a quarter over 20 — considerable replacement demand, in other words. He also noted that tanker owners carry far less debt than before the 2008 crash, which makes the industry structurally harder to knock over.

DHT's own discipline rests on internal "traffic lights" governing investment and risk. Those hold even when high spot rates make restraint look expensive. And the spot rates are genuinely expensive: Harfjeld described a refinery customer accepting a voyage 40 days longer, at a 50% higher freight rate, purely to avoid heightened Red Sea risks. Shippers are paying half again as much for the scenic route.

Is the boom already fading?

Gus Majed, founder and group chief executive of Paratus, called the surge in tanker earnings a rational response to the breakdown of established energy routes and refining markets. But he drew a line under the qualifier.

"Returns are starting to compress on a risk-adjusted basis," he said. The frequency of attacks is eroding the appeal of those headline numbers once you price in the danger. Majed also warned that governments and companies are reassessing energy security and strategic stockpiles. His tell for the top: a flattening between spot and forward freight rates would signal the boom is losing momentum.

What about the back office?

René Kofod-Olsen, chief executive of V.Group, warned that record earnings shouldn't obscure operational weaknesses. Some owners, he said, still manage fleets of "10, 20, 30 ships on WhatsApp and the occasional e-mail" — a sentence that arguably justifies the cyberattack concerns on its own. He pointed to cyberattacks on vessels and offices as evidence that investment in systems and training has lagged, and urged owners above all not to treat seafarers and technical management as commodities.

From the floor, Andy Dacy of JP Morgan Asset Management cautioned against chasing ships at the top of the market, suggesting public and private owners may behave differently when valuations turn. Lars-Christian Svensen, who heads Bruton, Himalaya Shipping and OMC Tankers, countered that the spot-versus-long-term identity question matters less than flexibility. Owners need to be nimble and prepared to sell into strength.

What does this change for shippers and owners?

For charterers, the message is that wartime economics still have room to run — half the VLCC fleet needs replacing within five years — but the risk premium is quietly rising even as headline rates soar. For owners, the forum's consensus was less about calling the top and more about not being leveraged, unprepared or undisciplined when it arrives. Watch the orderbook-to-fleet ratio and the spot-forward spread; both will tell you more than any boom-year balance sheet.