This has resulted in a small surge in newbuilding orders, with 24 vessels placed for the year to date (3rd October), said EA Gibson in a recent report.
While it has been a tough few years trading these ships on the spot and timecharter markets, 2014 has seen an improvement in shipowners’ fortunes.
This has given owners confidence to harden their timecharter rate ideas and led to less enthusiasm to commit to this type of employment.
In Gibson’s matrix, a 12-month rate for a modern non-eco vessel is $22,000 per day, compared with $15,000 per day at the same stage last year. There has definitely been growing demand from charterers for timecharter tonnage and we see more enquiry for Suezmaxes compared to VLCCs, Gibson said.
By the time Posidonia 2010 came around, there had been 52 Suezmax newbuildings placed in the first half of that year after intensive marketing by the shipyards who had reduced their prices from a market high of in excess of $93 mill in 2008 to a more enticing $67.5 mill. Later that year, these orders were followed by a further 22.
Following the 2010 deluge of Suezmax contracts, the general view was that the number of ships ordered would kill the market and the lack of ordering in the interim highlighted the loss of confidence in this sector whose earnings struggled.
For example, in 2011 there were 21 orders placed, which dwindled to nine in 2012 and just three in 2013.
In recent years there has been a dramatic change in Suezmax trading patterns out of West Africa, due to declining US demand for West African crudes. In the third quarter of 2013, 47 spot fixtures were reported in comparison to 21 this year.
On the West Africa/Europe (TD20) route, 80 fixtures were recorded in the third quarter of 2013 in comparison to 122 this year - an increase of 42 fixtures.
Suezmaxes have also benefited from the increase in liftings from the Middle East Gulf (mainly Basrah), with the third quarter of 2013 showing 103 in total; 42 East and 61 West.
In the third quarter of this year, the total had risen to 125, of which 58 East and 67 West - an increase of 16 and six respectively.
The number of longhaul fixtures from West Africa to the East declined marginally although the number of West Africa/East VLCC fixtures climbed by over 36 liftings in Q3 2014 versus the same period a year earlier.
The flat growth profile of the Suezmax fleet and better returns in 2014 explain why some 24 vessels have been ordered this year, lifting the orderbook to 43 vessels, or 9% of the existing fleet, consisting of 474 vessels. Similar to VLCCs, this is a modern fleet with some 205 vessels out of the total being delivered in the last five years.
Euronav, who operates 23 Suezmaxes, achieved average TCE earnings of $17,500 per day in the first half of 2013 from its spot trading Suezmaxes. Returns rose to $23,300 per day in the first six months of this year.
While Suezmax earnings softened through August to late September, at the time of writing, we are seeing a further surge in spot rates with TD20 showing $28,000 per day basis slow steaming and the rates are still firming as at the beginning of October, Gibson concluded.