Saudi Arabia's crude shipments, which had been rerouting through the Red Sea to avoid a blockade of the Strait of Hormuz, have seen another shift. As the threat from Houthi rebels has grown as far as the Bab el-Mandeb Strait at the southern entrance of the Red Sea, the northern Red Sea route from Yanbu in western Saudi Arabia to Ain Sokhna near the southern end of the Suez Canal in Egypt has emerged as a Saudi crude corridor.
Until now, very large crude carriers (VLCCs), which can carry about 2 million barrels of crude at once, have mainly been deployed on the Yanbu–Ain Sokhna leg. The larger the vessel, the lower the transport cost, because it can carry more cargo in a single trip. But five Suezmax tankers, smaller than VLCCs, have been deployed on this route for the first time. As throughput via the Suez Canal has increased, demand has grown for Suezmaxes that can transit the canal fully laden.
◇ As crude detours shift, Suezmax prices and rates surge
According to the shipbuilding and shipping industries on the 1st, Greek carrier Naftomar recently bought the 2024-built Suezmax Bristol on the secondhand market for $123 million. That is 12% higher than the $110 million apiece it paid in June for two secondhand vessels of the same class.
Considering that the ship new building price for a newly built VLCC, which has double the carrying capacity, is currently about $131 million, the price of a two-year-old secondhand Suezmax has risen to as high as 94% of a new VLCC. An industry official said, "With instability spreading from Hormuz to the southern Red Sea, there is a rush to secure Suezmaxes that can be used immediately."
Suezmaxes have become scarce because the detour route for Saudi crude has shifted again. Saudi Arabia has an approximately 1,200-kilometer east–west transnational pipeline linking eastern oil fields with Yanbu on the Red Sea coast. Crude produced in the east is moved by overland pipeline to Yanbu on the western Red Sea coast. When traffic through Hormuz was effectively blocked by the U.S.-Iran war, Saudi Arabia used this pipeline as a bypass. It moved eastern crude to Yanbu in the west, loaded it onto ships, and sent it to Asia via the southern Red Sea and Bab el-Mandeb.
But in July, as the Houthis threatened vessels linked to Saudi Arabia, even this route became uncertain. The volume of Saudi crude passing through Bab el-Mandeb, which exceeded 3.5 million barrels per day in early July, fell to virtually zero in August.
With the southern route growing risky, Saudi crude began heading the other way, toward the Suez in the north. Some goes directly through the Suez Canal, and some crosses into the Mediterranean via Egypt's SUMED pipeline.
This is where the Suezmax's advantage is maximized. When a VLCC is fully laden with 2 million barrels of crude, its draft is too deep to pass straight through the Suez Canal. A Suezmax, by contrast, can transit fully laden with about 1 million barrels. As routes have shifted, the utility of Suezmaxes, which can pass through the Suez Canal fully loaded, has grown.
Suezmax rates have also jumped sharply. The Suezmax time-charter equivalent (TCE) on the Black Sea–Mediterranean route neared $400,000 per day on Aug. 21. The average Suezmax TCE was $269,824 per day, even surpassing that of VLCCs ($234,821), which carry twice the cargo.
◇ Suezmax shortage spreads to newbuild orders
Inquiries for Suezmaxes are also flowing to domestic shipyards. Daehan Shipbuilding, which specializes in building Suezmaxes, has booked 17 of the class so far this year, effectively filling its construction schedule through the end of 2029. Daehan Shipbuilding is currently selling slots for 2030 delivery.
Among shipowners, some are moving to secure 2029 building slots even at higher prices. Samsung Heavy Industries signed a contract in late July with a Turkish owner for two Suezmax crude carriers to be delivered by Aug. 2029 at about $93 million per vessel. That is roughly 7.5% higher than the ship new building price for Suezmaxes ($86.53 million) just before the deal.
The industry sees the Suezmax strength likely continuing for the time being. Traffic through Hormuz still remains well below normal levels, and the Houthi threat in the southern Red Sea persists. An industry official said, "Even if Hormuz normalizes, it will take considerable time for carriers and insurers to lower their risk assessments and return ships to previous routes," adding, "Major shipyards' Suezmax building schedules are filled for the next three years, so secondhand prices and charter rates are unlikely to ease quickly in the short term."