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Monday, December 11, 2017

Suezmax fleet and market

Johan G Olsen (JGO) lists a total of  377 suezmax tankers in its latest Suezmax Review – one ship less than six months ago - together with an orderbook of 142 vessels (a reduction of 8). 

 

Thirteen of the suezmaxes listed are OBOs and four (1970/80s-built) are used for storage and are unlikely to trade again. As many as 40 of the suezmaxes have been recorded as shuttle tankers, most of which are operated by Norwegian-based operators, and 4 as FPSOs/FSOs.  We have recorded 41 single hull (SH) suezmaxes (including double bottomed (DB)/double sided (DS)) that are not reported sold for conversion or are not used for storage or FPSOs. Only 12 the SH suezmaxes are 20 years or older.

 

Some 70 of the suezmaxes are fixed to 2010 and beyond, and 108 are oil company/state-owned.  This leaves 199 suezmaxes in the spot market (up 19 from 6 months ago).

 

 

(The graph only contains trading suezmaxes; those reported sold for conversion are not included

 

We have received reports of a number suezmaxes that have been sold for conversion to dry, heavy lift, and FPSOs/FSOs - 4 in both 2005 and 2006, 14 in 2007 and 5 so far in 2008. One suezmax has been sold for decommissioning. We also have reports of altogether 5 SH suezmaxes that have been converted to double hull.

 

The deliveries 2009-2010 will most likely create a surplus of suezmaxes that may continue beyond 2015 even with no more new orders, assuming a 2.5% increase in demand annually.  It is also likely that some SH suezmaxes will not continue to trade until the age of 25 years, or maximum 2015, as 21 of them will be 20 years or younger in 2010 (if they are not converted) and there will probably be niches were they can continue to trade.  It has also been assumed that there will be 20 removals of SH tankers in 2008/9 before final phase-out of SH tankers in 2010. The DB/DS ones are assumed to continue to trade until the age of 25 years old.

 

The loading areas for the few remaining SH suezmaxes are the Arabian Gulf/Red Sea area where, according to Fearnleys, 49% of the loading was done by SH tankers. In other areas the loading of SH tankers in 3Q07 was 5% or less except North Africa where it was 9%. The discharging of SH suezmaxes in 3Q07 occurred mainly in the Far East/Japan area where 43% of the discharging was by single hull tankers, and in other areas outside Europe and the Atlantic side of the Americas where it was 28%. In Europe and the Atlantic side of the Americas the shares were 2% and 5%.

 

Freight rates so far in 2008 have been very strong and the average for (Wafr-US 130,000 ts) has increased by almost USD 21,000 per day compared to the average for 2007.  2008 could be the best year for suezmaxes ever, but even if the market balance will remain tight, the situation could soon turn if the demand weakens.

 

The four biggest suezmax owners in Johan G. Olsens’ book are Teekay (32 suezmaxes/8% share), Frontline (18), and Konig & Cie and Euronav (15 each).  There are altogether just over 100 suezmax owners, including a few with orders only. Several owners have more orders than they have existing vessels, such as Metrostar with 7 orders and Yasa with 5 orders. There are 9 owners with 11 suezmaxes or more and these owner have together a market share of 38%.

 

Typical suezmax trades from West Africa and from the Mediterranean increased in 2006 and are set to increase also in 2008. The export of Azeri crude oil through the BTC pipeline to Ceyhan is projected to reach more than one million barrels per day in 2008.

 

But key suezmax trading area, the North Sea, saw oil output decline 11.5% year-on-year in April to 3.84 mbd - 2.8% lower than March. Production from UK fields fell 0.197 mbd (or 12.7%) on the year to 1.35 mbd, with 0.104k mbd of the decline coming from the Forties field. Output from Norway dropped 0.268 mbd (or 11%) from the same month last year to 2.16 mbd.

 

However, while this drop in North Sea oil production will naturally affect shuttle traffic, it could also mean that North Europe will take oil from sources further away such as West Africa or from the BTC pipeline which is expanding throughput. More oil could also be taken from the Middle East. The net effect of reduced North sea production could, therefore, actually be positive both for suezmaxes and VLCCs.  In the longer term, Russia wants to expand pipeline capacity to Primorsk, which could mean that Europe will take more Russian oil.

 

About half the suezmax fleet operates on the spot market. The number of recorded period contracts of one year and longer was 23 in 2005 (average rate USD 35,178 per day), 18 in 2006 (average rate USD 36,839 per day), 26 in 2007 (average rate USD 38,177 per day), and 7 so far in 2008. The average period rate recorded in 2008 was some USD 39,500 per day ranging from USD 31,000 per day for a 1991-built unit taken for 1 year to USD 52,000 for a 1993-built unit taken for 2.9 years. The average period was 2.5 years.

Year

No suezmaxes

Increase

Deliveries

Removals

 

1 Jan.

 

 

 

2001

284

-4.23%

16

-28

2002

272

2.57%

24

-17

2003

279

3.58%

25

-15

2004

289

3.81%

25

-14

2005

300

7.33%

25

-3

2006

322

6.83%

26

-4

2007

344

3.20%

25

-14

2008

355

3.10%

21

-10

Pr09

366

13.39%

59

-10

Pr10

415

9.16%

47

-9

Pr11

453

3.31%

15

0

Pr12

468

 

 

 

Total

 

 

334

-190

 

Contact: Erik Ranheim