Drewry Maritime Research’s latest Tanker Forecaster report indicates that Suezmax owners got some respite in the first quarter of the year, but things are looking bleak in the longer term. Spot rates firmed on the back of buoyant demand in the Caribs, Arabian Gulf and West Africa, but rising bunker prices would have absorbed much of the increase. US demand for West African crude was the one to watch as it staged a recovery in March and underpinned Suezmax rates on the benchmark TD5 (West Africa / Caribs - US) route, with earnings surging 64% to $18,733pd.
But the recent market strength seems a mere aberration rather than a fundamental upward shift. Fundamentals are expected to remain bearish in the near term with the supply-demand gap broadening and a larger number of vessels chasing fewer cargoes.
That lack of confidence was visible in the time charter market, with only two Suezmax vessels fixed during the first quarter. The 12-month rate for five-year old vessels averaged $17,067pd, down about 2.5% from the previous quarter.
Demand is likely to suffer from seasonal weakness in the coming quarter, while the fleet will continue to expand. Drewry expects the Suezmax supply-demand gap to widen from 12.8 million dwt to 14.8 million dwt in the second quarter, while earnings on West Africa-Caribs/USES are expected to average $11,800pd.
With the fleet growing by 7% in 2012 and 2013, market conditions will only start to improve from 2013 onwards, mainly on expected improvement in demand with recovery in the global economy.