The recent surge in Capesize spot rates has slowed down, particularly in the Atlantic market. The weak Panamax market is impacting larger vessels as shippers opt for more cost-effective Panamax-sized shipments. The slow pace of grain exports from the U.S. Gulf is further weakening demand for mid-sized dry bulk vessels, hindering a sustained recovery in the dry bulk sector, reports Breakwave Advisors.
China Maintains Flexibility
There is considerable uncertainty surrounding the direction of U.S. trade policy, and China maintains substantial policy flexibility, which should allow it to offset potential negative impacts from new tariffs or trade restrictions. However, we believe the prolonged and challenging adjustments within China’s real estate sector are unlikely to benefit significantly, as any economic stimulus is expected to target emerging technologies, renewable energy, and high-value products rather than new construction.
This focus does not favor traditional industries such as steel. Iron ore inventories remain high, and we expect them to reach record levels in the coming months as construction activity slows due to seasonal weather factors. An inventory cycle appears imminent, and we anticipate a notable decline in inventories next year, which could negatively affect Chinese iron ore imports following a year of strong demand. Such inventory cycles typically exert downward pressure on prices, and we expect iron ore prices to fall into the $70s per ton soon to achieve a more balanced seaborne market.
The last few years have been characterized by increased geopolitical uncertainty. Going forward, we expect such events to continue to affect global trade and have a meaningful impact on effective vessel supply. Combined with the potential for a multi-year cyclical rebound in China’s economic activity following the recent economic turmoil, dry bulk shipping should experience higher volatility.
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Source: Breakwave Advisors
