MID-SHIP Report: Dry Bulk Freight Market – Jan 9, 2025
January 9, 2025
At present, the dry bulk market continues to face challenges due to an oversupply of vessels and low activity levels as we recover from the year-end holidays and anticipate the upcoming Lunar New Year celebration.
The themes discussed in our fourth-quarter reporting continue to impact the dry bulk market. China’s economic issues, particularly those related to the real estate market and local government debt, persist ahead of their seasonal pre-Lunar New Year lull. Contributing fundamental factors include normalized Panama Canal transits returning capacity to the market, a steady increase in new build vessel arrivals (predominantly geared vessels), improved port efficiency, and reduced port congestion. Notably, Brazil experienced lower corn demand from China last year. It remains to be seen if we will again observe the double knock-on effect of reduced congestion at Brazilian grain ports and fewer long-haul grain shipments in 2025, as we did in 2024, along with intra-segment rate cannibalization (Panamax competing with Capesize vessels). More broadly, “effective fleet growth” will continue to exert pressure on our markets. The rerouting of vessels away from the Suez Canal remains a supportive factor. New geopolitical dynamics effecting our markets are additional uncertainty following recent comments by the U.S. President-elect, related to the Panama Canal, Greenland and sanctions.
Looking ahead, after the quiet period during the Christmas and New Year holidays, we anticipate a subdued January leading up to the January 29th Chinese Lunar New Year celebration. Market activity is expected to revive in March as the grain trade shifts to the southern hemisphere and seasonal demand returns across all regions.
Dockworkers on the East and Gulf Coasts reached a tentative labor agreement with employers on Wednesday, averting a strike.
On Monday, the U.S. Pentagon added several prominent Chinese businesses to a list of companies identified as military in nature, including some of the country’s largest internet, battery, science, and shipping firms. This announcement, along with the accompanying media coverage, has introduced additional uncertainty for the shipping markets and charterers considering trades with Cosco. Although the Treasury Department’s SDN list has not been expanded as of this writing, this announcement and the impending change in the U.S. administration has heightened concerns about potential further sanctions.
Future developments will depend on the impact of recent stimulus measures in China and the uncertainty surrounding the new U.S. administration’s influence on trade, global economics, and geopolitical relations. We anticipate stability on the demand side in the coming year, with particular attention to the potential impact of sanctions that previously affected the steel trade and agricultural product volumes during the last round of sanctions under the prior Trump administration.
Analysts hold mixed views on the market outlook for 2025. While some predict a recovery in demand for dry bulk commodities, others remain cautious due to potential economic slowdowns and ongoing geopolitical uncertainties. Considering the fundamental changes on the supply side, we expect slightly lower average levels year-over-year and increased positional volatility throughout 2025 due to the more finely balanced supply/demand ratio in the dry bulk market.
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