SUEZMAX: A Supporting Player of the Past Takes Center Stage

By Jerry Lichtblau, Director of Research & Analysis, Mallory, Jones, Lynch, Flynn & Associates

Many of us have been taught that the price had we are charged for any goods or services is a function of supply, demand and alternative goods and services. The Suezmax sector has entered the new millennium with a reduction in demand. It has faced increased cannibalization from VLCC’s in its core region for demand, yet the price has risen by at least 20% for cargoes loading in the regions of predominant Suezmax demand.

Rising prices in the face of a reduction in demand and increased use of alternative goods can lead one to conclude that there is an inadequate supply. In this case, not enough Suezmax ships. Why the sudden change in supply? Simplistically, the impact of OPA; but there is rarely one answer to a question like this. There are usually a myriad of issues.

This briefing will attempt to support the preceding premise and evaluate prospects going forward while reviewing the risk factors that are generally ignored when bull markets roars into bulk shipping. We will analyze and review the supply and demand dynamics of the suezmax sector, assess the near term outlook for the sector as well as competition from other segments. Finally, we will evaluate the earnings required for adequate returns in an effort to highlight the importance of cost basis of this or any asset.

This is only an excerpt of SUEZMAX: A Supporting Player of the Past Takes Center Stage

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