Suezmax Tanker Market Improves

 

For most of last year the Suezmax market outperformed VLCCs, with spot earnings for West Africa-UKC (TD20) regularly above VLCC returns on the benchmark TD3 trade. 

 

Firmer Suezmax earnings were aided by rising West Africa to Europe crude trade, dramatic increases in spot fixtures out of the Middle East Gulf and a more active Caribbean market. 

 

These developments offset the near disappearance of the key Suezmax trade from West Africa to the US. While demand increased, Suezmax supply remained largely flat last year, with the average fleet size expanding by just 2 units.

 

Gibson added that this year owners of Suezmax tonnage are enjoying even better returns, with earnings on TD20 well above average levels seen in the previous six years. 

 

Owners’ sentiment is strong, with much greater resistance to downside pressure when chartering enquiry is limited. Nonetheless, Suezmax earnings started to lag notably behind VLCC returns. 

 

In April alone, average TD20 earnings were around $36,000/day compared to $62,500/day for TD3. Is this change in market dynamics between two tanker classes a temporary mismatch in the supply/demand balance or is it due to a more fundamental reason”, Gibson asked.

 

 "On balance, we are unlikely see any major increases in Suezmax demand this year but gains in supply will also be marginal. As such, the status quo should be maintained, with the Suezmax market as usual remaining perceptive to the developments in other crude tanker segments. With VLCC and Aframax earnings currently at $57,500/day and $41,500/day respectively, the downside risk appears limited. However, how long will the current “boom” going to last?” says the report.