We at Pyxis believe that our modern eco-efficient mid-sized vessels, operated safely and well maintained by our managers, lead to attractive chartering arrangements and cost-effective return on capital for the benefit of our shareholders.
Product Tanker Sector
Primarily, we address the worldwide market for the marine transportation of refined petroleum products, which is driven in turn by demand for transportation fuels, including gasoline, diesel/gas oil, jet/kerosene and naphtha. We believe that fundamental population growth combined with increasing per capita incomes and further industrialization will lead to long-term demand growth globally for transportation fuels. In recent times, major armed hostilities have had a significant impact on the product tanker sector. The invasion of Ukraine by Russia in late February, 2022 shocked the global energy markets. As a member of OPEC+, Russia has been a major producer of crude oil at 11.4 million barrels/day as of February 2022 of which ~8 Mb/d were exported. At that time, Russia exported 2.85 Mb/d of refined petroleum products of which 1.5 Mb/d went to Europe. As a result of this war, many countries introduced a broad range of sanctions on Russian goods and commodities, including petroleum products, which has affected global trade and relationships. Further, the EU and G-7 group of 27 countries ban on the importing of Russian refined products and price caps went into effect in early February, 2023. The Russian/Ukrainian war and the more recent Red Sea conflicts have caused major disruptions in the global oil markets, changing trade patterns, supply dislocations of refined products, expansion of ton-miles and higher charter rates. Inventories of certain refined products remain below 5-year averages in a number of locations. In April, 2025, the IMF slightly lowered its estimate for global GDP growth for 2025-26 to average 2.9% per year due to the effect of tariffs and the prospect of rising inflation which should adversely impact economic activity. In May, the IEA reduced its estimate for global oil consumption to increase 0.7 Mb/d, less than 1% YoY, to average 103.9 Mb/d in 2025.
As an indicator of improving demand, OPEC+ recently announced that it would accelerate the gradual return of its 2.2 Mb/d voluntary oil production cuts by 941 Kb/d during April-June 2025, which could lead to a full unwind by late this year. At the same time, additional sanctions on Russia along with expanded U.S. led restrictions on Iran and Venezuela, may limit petroleum exports, primarily to Asia, curb the employment of the “Dark Fleet”, which should increase demand for compliant tankers. Recently, the EU announced its 17th round of sanctions against Russia and its related entities.
Overall, crude supply is estimated to rise 1.6 Mb/d to average 104.6 Mb/d this year, principally due to greater production of non-OPEC+ countries in the Americas. In May, EIA estimated that U.S. oil production increased 2% YTD to average 13.3 Mb/d. Modest demand growth combined with ample supply should lead to subdued oil prices for the remainder of 2025, barring the impact of geo-political events.
The global economic environment continues to be very fluid, complex and volatile. The recent introduction of tariffs, led by the U.S., combined with continued restrictive monetary policies have resulted in slowing economic activity in many parts of the world, the expectation of rising inflation starting 2H 2025 and higher market volatility. The outlook in the short-term will be dependent of the impact of de-stabilizing geo-political events and macro-economic conditions, led by the Russian/Ukrainian war, and the uncertain implications of the Israeli/Hamas/ Houtis/ Iran conflicts in the Middle East. Starting in January, 2024, the Red Sea conflicts has negatively impacted shipping with re-routing from the Suez Canal around the Cape of Good Hope (“COGH”), expanding market dislocation and further increasing ton-miles. In 2024, transits through the Suez were down 50% vs. 2023. Typically, voyages around the COGH add 15 sailing days from ports in the Arabian Sea to Europe vs. the Suez Canal passage. In 2024, ton-miles increased 3.7% while the average voyage rose 4.8% to 3,560 miles according to Drewry, a well-respected independent research firm.
The United States, Asia and Middle East are the largest exporters of refined products, accounting for over half of total exports. Refining capacity, inventory levels, domestic demand and worldwide arbitrage opportunities can influence the movements within these regions. In the past, global shifts in refining capacity and the increase in U.S. crude oil production, led by the rapid expansion of shale-based oil, have been positives for demand of product tankers. Global refinery conditions have recently improved, evidenced by higher crack spreads and rising utilization. Global throughput is forecasted to increase slightly to an average of 83.2Mb/d in 2025, according to the IEA.
Changes in refinery locations have also led to further ton-mile demand for product tankers. The emergence of export-oriented, more efficient mega-refineries located near the well-head, e.g., the Middle East, and the reduction of OECD (namely in Europe, Japan and Australia) refining capacity are examples of factors that influence locations of refineries. In March 2025, Drewry estimated that 3.2 Mb/d of new capacity (net) is scheduled to come on line between 2024-2028, virtually all non-OECD.
Product tankers are differentiated by their coated cargo tanks, predominately epoxy-based paint, which minimize any corrosion from refined petroleum products and facilitate the rapid cleaning of cargo holds. Based on carrying capacity, the worldwide product tanker fleet ranges from small tankers under 10,000 deadweight tons (or dwt) carrying capacity to 120,000 dwt. A main group of vessels transporting the majority of cargoes consists of 3,254 product tankers which range from 10,000 to 80,000+ dwt and aggregate over 179.5 million dwt as of February 28, 2025 according to Drewry. Our area of focus, the Medium Range (or MR2) category represents the largest total carrying capacity at 46.7% (dwt) of the product tanker sector. MRs are considered the workhorse and usually operate in the Atlantic and Pacific basins. Customers include major integrated and national oil companies, international commodity trading firms and refiners.
The MR2 tanker supply outlook is mixed. New orders for construction of product tankers increased significantly in 2023-24 and the long-anticipated scrapping of older, less efficient tankers continues to be postponed. The growth in the supply of product tankers is primarily related to new build (“NB”) orders, usually placed at Asian shipyards, and demolition of older tonnage. Aggressive new orders for other types of ships, such as containerships and gas carriers, have resulted in delivery slots for new MR2 product tanker orders being pushed to 2H 2027 or later. The placement of orders for NB’s is primarily a function of a shipowner's outlook for demand for such vessels (i.e., future charter rates), construction costs and availability at the yard, age of the existing fleet as well as cost and availability of funding. NB prices for MR2s have recently softened to $50 million, exclusive of higher specifications, yard supervision and spares. Other decision-making factors for an owner include developments in ship and engine design, scrubbers, stricter environmental regulations, as well as the availability and pricing of alternative low-carbon fuels. Product tankers have an expected operating life of 25 years, but certain major charterers have lower age restrictions.
According to BRS Ship Brokers (“BRS”), increased ordering for the new construction of MR2s has resulted in the orderbook (“OB”) of 17% or 316 tankers of a worldwide fleet of 1,862 MR2s as of May, 2025. But the pace of new orders has slowed dramatically to only 12 YTD. Slippage in new build deliveries was 13.3% last year according to Drewry, and the pace continues to lag. There were 320 MR2s, or 17.2% of the global fleet over 20 years of age, virtually the same size as the OB. Despite the number of old MR2s, demolition continues to very low by historical standards. Zero MR2 were scrapped in 2024 due to robust chartering conditions for most of the year and strong asset values. Slowing economic activity globally resulted in softer charter rates starting 2H 2024 and more recently lower prices for second-hand tankers. In the 5 years prior to the start of the Russian/Ukrainian war, an average of 16 tankers were demolished every year. Expanding environmental regulations, higher compliant bunker fuel prices, increasing running costs, reasonable scrap prices and vessel aging should result in more demolitions of older tankers over the long term. For 2025, we estimate that annual fleet growth of 5-6%, net of vessel scrapping and delays in MR2 newbuild deliveries.
Tanker operations and vessels are significantly regulated by international conventions, such as SOLAS and MARPOL, class requirements, various governmental health, safety and environmental laws and regulations, including OPA and CERLA, IMO regulations and by other jurisdictions. IMO regulations governing CO2 emissions, including Energy Efficiency Existing Index (EEXI) and Carbon Intensity Indicator (CII), which started in 2023, may lead to a reduction /limitation of available vessels This year, the IMO is seeking passage of Net-Zero regulations under MEPC 83. If implemented, further carbon reductions would start in 2028, and non-compliant vessels would see material penalties. Consequently, older, less efficient vessels would be at a competitive disadvantage, resulting in slower speeds, lower utilization and higher running costs, as well as fragmentation in chartering. The independent classification societies certify that a vessel has been built and maintained in accordance with established rules and regulations, including periodic inspections and surveys of the vessel. In addition, many charterers have established certain standards to employ vessels carrying refined products guaranteed by strict vetting processes. Consequently, quality vessels and flawless operations are paramount within the product tanker industry.
Dry Bulk Sector
We own controlling interests in three modern mid-sized eco- efficient dry bulkers. Through a 60% equity interest, we control a single ship joint venture which owns a 2016 Japanese built 63,250 dwt. scrubber-fitted Ultramax dry bulk vessel which was purchased in September, 2023. In February, 2024, we acquired a 2015 built Chinese built 83,013 dwt. scrubber-fitted Kamsarmax (KMAX) carrier, and in late June, 2024, we closed a similar joint venture investment in a sister ship. These strategic investments into the dry bulk sector are supported by counter-cyclical fundamentals, and to a lesser extent, counter seasonal activity, in contrast to the product tanker sector and should provide attractive long term returns to our shareholders. Our management and Board members have extensive experience in owning and operating dry bulk carriers.
At this point, dry bulk supply/demand fundamentals indicate a challenging market in the short-term. Demand growth for many dry bulk commodities, primarily consisting of iron ore, coal, gains and minor bulk materials, is moderately tied to global GDP growth which is expected to increase 2.9%%/yr. on average through 2026. Growth in Chinese GDP was recently lowered to 4% for both years which would typically impact imports of iron ore and coal. Recently, Drewry forecasted total dry bulk demand growth of 2.4% for 2025, with a compounded annual growth rate (“CAGR”) for 2024-30 of 2.5%. Specifically, it estimated long-term CAGR for certain minor bulk commodities such as grains at 2.1% and bauxite at 8%. Led largely by China, the global energy transition is resulting in greater shipments of bauxite and thermal coal for electrification.
In early March, 2025, Clarksons estimated the orderbook at 108.9M dwt. or 10.5% of the worldwide fleet of dry bulk tonnage of 1.04B tons with ~9.7% of capacity at 20 years.+. It estimated the orderbook for Kamsarmax carriers at 349 or 20.8% of the global fleet of 1,682 bulkers with 99 NB deliveries scheduled for the remaining 10 months of 2025. The orderbook for the modern Ultramax class stood at 440 units or 27.7% of the global fleet of 1,586 vessels with 150 NB deliveries scheduled for the remainder of the year. According to Drewry (March, 2025), 69% of NB orders were with Chinese shipyards. In 2024, delays in NB deliveries were 28% for Kamsarmax and 6% for Ultramax. Despite the relatively younger age of these class of bulkers, a continuation of lackluster chartering conditions combined with higher running costs and greater regulatory/environmental compliance of old ships may increase the activity level of demolitions. Starting in 2H 2024, prices for bulk carriers materially declined; but recently, the values for second-hand Kamsarmax and Ultramax have stabilized.