A collision that set two vessels ablaze off Singapore has underlined the growing risks around the crowded Strait of Malacca, as the dark fleet expands and lackluster Chinese demand leaves dozens of the tankers idling.

The Ceres I, a 23-year-old crude oil tanker sailing under the flag of Sao Tome & Principe, and the Hafnia Nile, a Singapore-flagged refined-products tanker, crashed early morning last Friday, in one of the world’s busiest waterways. Ceres I then fled the scene with two tugboats, before being intercepted off Malaysia.

The incident ended without tragedy, with both crews accounted for and limited environmental damage. But the likelihood of a different outcome is rising - not only because more uninsured, ageing vessels are passing through the straits, but because dozens of these ships are circling in the same waters. Their transponders are often switched on and off, making their movements harder to track.

Currently, there is a cluster of about 30 ageing tankers in waters east of Malaysia, all bearing the hallmarks of shadow-fleet vessels. Built at least two decades ago, many may find it difficult to access ports because of the pollution risk. For more than two-thirds of these carriers, no insurer is identified on international shipping databases.

The waters east of Malaysia, the trade lane connecting Asia to the world’s major petroleum exporters, have long been a hot spot for dark fleet activity. Clandestine ship-to-ship transfers of oil from one vessel to another are regularly carried out to obscure the origin of shipments. Vessels also tend to wait in the calm waters between assignments or when demand slows.

But the number of older tankers in that cohort has increased significantly over recent years, as Western sanctions prompt Iran, Russia and Venezuela to find alternatives to mainstream vessels and service providers.

While the current flotilla is not at its largest size for the year when compared to recent months, its existence and persistence is indicative of the increasing congestion in the strait. A majority are very large crude carriers, or VLCCs - the industry’s biggest class of oil tankers - according to data compiled by Bloomberg. And a third are close to full, based on their depths in the water. 

Shipbrokers said the freight market for dark-fleet vessels has softened in recent weeks, due to an oversupply of the ships.

The 30 idling carriers are part of a larger group, totalling almost 50 anchored in that area. The others are newer, although most of them were built in the 2000s and sailing with unknown insurers. 

Singapore and Malaysia have both had several oil warnings of late. Last year, an explosion on board the ageing oil tanker Pablo ripped off its deck like a sardine can, and began a fire that sent dark plumes of smoke into the sky. Had it been laden with its most recent cargo, that would have been a major spill of sanctioned oil. A minor collision in Singapore’s port last month created its worst oil spill in over a decade.

Hafnia, owner of the smaller vessel involved in last Friday’s collision, said in a statement that the tanker is now stable, with no visible signs of flames or smoke. The company is working closely with Malaysian and Singaporean authorities to secure a towage plan and location for repairs.  

  - Bloomberg