Tradewinds: Thumbs Up for Suezmaxes

“Poten & Partners has become the latest broking shop to sing the praises of the Suezmax tanker market. “‘Suezmaxes appear to be a good investment again,’ the US-based shipbroker declares in its latest weekly market report. “Despite the recent jitters in the oil markets and some concern about economic growth in China and Europe, Poten says the general consensus about the outlook for the tanker market remains ‘cautiously optimistic.’ “‘The suezmax segment has adjusted well to the changes in global trade flows as a result of the shale oil boom in the US,’ it says. “‘While fixtures from West Africa to the US Atlantic Coast have dropped precipitously in recent years, movements to North West Europe, the Mediterranean and India have picked up.’ “Poten says the largest boost for suezmax employment has been the growth in liftings from the Arabian Gulf. “Based on activity to date, reported suezmax fixtures ex-Arabian Gulf could reach 600 in 2014, compared to 333 reported fixtures in 2012 and 215 in 2010. “Poten says another bright spot for suezmaxes has been the growth in long-haul fuel oil movements from the Atlantic to the Pacific. The number of reported suezmax fuel oil fixtures has tripled since 2010. “The broker forecasts that barring a collapse in worldwide oil demand, suezmax employment should remain “fairly healthy” in the coming years. “Poten says another comforting factor is that most of the recent newbuilding contracts have been placed by experienced suezmax owners with a proven operational and commercial platform and track record. “‘There is no indication that speculative money is fueling the recent uptick in orders,’ it says. “The broker also highlights the economics of a newbuilding over second hand tonnage, the values of which have picked up since the market started to recover in late 2013. “‘One year ago, we estimated the value of a 5-year old suezmax to be $38m. Today’s assessment for the same vessel is $55m: an increase of 45%,’ it said. ‘This price increase could be a reflection of a positive market outlook as well as a very tight secondhand market, as there are very few modern suezmaxes from quality yards for sale.’ Poten claims that newbuilding prices have not moved nearly as much as secondhand prices over the same time period. Our price assessment for a newbuilding ‘eco’ suezmax is $68m today, only 4% higher than the price a year ago, with some recent orders reportedly done at prices that are even $5-10m lower. Based on these prices, the 20-year breakeven rate for an ‘eco’ newbuilding is in the $20 –$22,000 per day (p/d) range and with the 5-year time-charter rate for modern vessels at $28,000 p/d, newbuildings appear to be a fairly attractive investment.'”