- Owners Reluctant Despite Improved Security.
- Charterers Push for Suez but Struggle to Find Suez-Suitable Ships.
- Insurance and UBO Profiles Key to Route Eligibility.
Clean tanker voyages through the Suez Canal are now costing an extra $300,000 compared to the longer route around the Cape of Good Hope. This shift is largely due to tighter supply and some hesitation from owners. Even though security has improved and incidents have decreased, only a select group of owners, primarily from Greece, China, and the Persian Gulf, are willing to navigate through Bab al-Mandab and the Suez Canal, reports S&P Global.
A Shift from the 2023 Discount to Today’s Premium
Back in late 2023, rising regional tensions led to Suez rates being discounted by $900,000. Over the last two years, owners have increasingly sought a risk premium for the shorter but more unpredictable route, gradually turning that discount into the premium we see today.
Charterers Want Suez; Owners Are Hesitant
Charterers are eager to secure Suez transits, but owners are holding back, often managing to get the premiums they desire. Several chartering companies have confirmed they are routing cargo through Suez as demand rises and tanker supply remains tight, pushing rates even higher.
Insurance Restrictions Limit Eligible Fleet
One major hurdle is whether a vessel is deemed “Suez suitable.” This determination hinges on maritime insurance terms and the profile of the Ultimate Beneficial Owner (UBO). Some underwriters impose restrictions on Bab al-Mandab passages or charge extra premiums, frequently advising against navigating the region.
One source noted: “It all boils down to the eligibility of a fleet or tanker to move via the Suez Canal.” If a tanker’s UBO includes Israelis, Europeans or Americans, the perceived risk remains high, even after the Israel-Iran ceasefire and the recent peace deal.
Crew Safety and Commercial Incentives Shape Decisions
A major tanker owner reiterated their stance: “For us, the crew safety comes first, and there are no plans to resume using the Suez Canal.”
Charterers argue that owners prefer the Cape route because it offers higher returns and keeps vessels employed longer. The Cape detour adds 10–14 days to a Persian Gulf–UKC voyage.
Cape Route Earnings Remain Strong
Daily earnings for PG–UKC via the Cape are as follows:
- $49,000 for LR2s
- $35,000 for LR1s
Owners are looking for Suez premiums that would allow them to earn similar amounts on the shorter route. As of November 26, Platts reported Cape freight at $4.6 million for LR2s and $3.525 million for LR1s, both up by $200,000 from the previous day.
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Source: S&P Global
