A strong VLCC market this year is boosting Suezmax Tanker demand. Suezmax sales activity has picked up considerably in recent months, with sales so far this year up 35%, reaching 124 sales compared to 92 sales over the same period last year. Buyers have continued to transact even as values have climbed, pointing to strong sector demand. Both values and timecharter rates are now at an all-time high, with one year timecharter rates four times higher than this time last year, adding to the momentum behind sales and keeping buyer and seller interest firmly focused on the sector.
The average age of vessels sold is 15 years. On the buying side, Greece has been the biggest buyer with 21% of purchases, followed by the UAE with 15% and China in third place with 8%.
Greece has also been active on the selling side, accounting for 33% of sales, including nine Suezmax vessels sold by Dynacom this year. China is in second place with 9% of sales and Belgium in third with 6%, as CMB.Tech and Exmar offloaded eight vessels combined.
Notable recent sales include the Suezmax Achilleas (158,400 DWT, Jun 2010, Hyundai Heavy Industries Ulsan) sold by Sun Enterprises for USD 98.0 mil, VV Value USD 100.47 mil. Also the Suezmax Maran Poseidon (158,300 DWT, Jan 2010, Hyundai Heavy Industries Ulsan) sold by Maran Tankers for USD 98.5 mil, VV Value USD 101.88 mil.
What’s Driving the Demand?
As VLCC values have risen this year, it has inadvertently pushed up demand for the considerably cheaper Suezmax Tanker segment. As attention has transferred from VLCCs to Suezmax Tankers, strong buying and higher earnings have pushed values up significantly across all size ranges, narrowing the price gap between the two, though not as sharply as VLCC values have risen.
Older Suezmax vessels have seen the biggest gains, with a 15YO 160,000 DWT Suezmax up c.134.58% since the start of the year, from USD 45.6 mil to USD 106.97 mil. The scale of the move for older tonnage shows how quickly pricing across the age spectrum has reset in a matter of months.
Earnings have moved in the same direction. One-year timecharter rates are up by 301% year on year, from 40,151 USD/day to 161,054 USD/day. Disruptions to normal trading patterns have made reliable tonnage harder to find, and with demand for Suezmax Tankers rising at the same time, owners have been able to command significantly higher rates for longer commitments.
A one-year timecharter now locks in earnings at a level that would have been hard to imagine twelve months ago, which helps explain why values have followed rates higher. Sellers are also looking to capitalise on these gains, with the combination of firm earnings and rising asset values shaping activity in the sector.
Part of the appeal of Suezmax Tankers is their versatility. Unlike VLCCs, they can transit the Suez Canal fully laden, which opens up a direct route between the Middle East, the Mediterranean and Europe and avoids the longer passage around the Cape of Good Hope. The Tankers’ size also gives them access to a wider range of ports and terminals than VLCCs, giving charterers more flexibility in the trades they can serve.
With VLCC values and earnings already elevated and vessels in short supply due to strong demand, Suezmaxes offer a more flexible and cheaper alternative within the Tanker market. Activity in the sector will be one to watch in the coming weeks.
