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Bauxite shipments from West Africa to China are expected to support Capesize freight rates in Q2 2025 after a sluggish start due to seasonal disruptions.
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Weak thermal coal demand in China, driven by high stockpiles and lower domestic prices, has pressured Panamax and Supramax freight rates, with a potential rebound depending on India’s pre-monsoon restocking.
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Proposed US tariffs on Chinese shipping and broader geopolitical tensions could disrupt global tonnage availability and impact dry bulk freight markets.
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While seasonal weather improvements are anticipated in Q2, unpredictable conditions may continue to affect vessel schedules and freight rate stability.
The first quarter of 2025 saw weak Capesize activity as seasonal weather disruptions in the South Atlantic and the Lunar New Year holiday dampened iron ore export volumes. Additionally, Tropical Cyclone Zelia in mid-February impacted mining operations in Western Australia, further limiting shipping activity, according to S&P Global.
Despite the sluggish start, market participants anticipate a rebound in Q2 2025 as cyclone activity in the South Pacific subsides and Brazilian iron ore shipments recover following the rainy season. A Capesize operator highlighted that Western Australia’s iron ore loadings are set to normalize, boosting freight demand.
A crucial factor for Capesize returns will be bauxite trade, particularly from West Africa to China. China’s seaborne bauxite imports surged to 175.7 million mt in 2024, up from 155.6 million mt in 2023, reflecting the commodity’s growing significance. Market sources suggest that robust bauxite flows will drive ton-mile demand, helping Capesize rates recover in the coming months.
Coal Market Weakness Weighs on Freight Rates
Thermal coal demand in the Asia-Pacific region has softened, with China Shenhua, a state-owned utility, halting new coal purchases due to ample stockpiles. This unexpected move has dampened expectations for a Q2 rebound in Panamax and Supramax freight rates.
While Panamax coal shipments typically increase in Q2, this year’s growth may be more subdued. Market participants expect China’s seaborne coal imports in April to decline sharply compared to March, further pressuring rates. A ship-chartering source noted that weak Chinese demand, coupled with abundant domestic supply, continues to challenge the coal trade.
Despite these concerns, some industry stakeholders believe the downturn in coal demand may be temporary. A shipowner emphasized that China’s decision to pause purchases is cyclical, aimed at managing high inventories. Once stockpiles are depleted, import demand could resume, mitigating the downward pressure on freight rates. Additionally, India’s coal restocking ahead of the monsoon season in June is expected to drive increased imports, offering potential support for Panamax and Supramax earnings.
Weather and Geopolitical Risks to Shape Market Outlook
Although seasonal weather conditions are set to improve in Q2 2025, uncertainties persist. Market participants caution that erratic weather patterns could continue to disrupt vessel schedules and impact tonnage supply, causing short-term freight rate fluctuations.
Beyond weather-related challenges, geopolitical tensions pose a significant risk to dry bulk markets. The US Trade Representative’s proposed port fees on Chinese shipping companies and Chinese-built vessels could disrupt global tonnage availability, distorting freight market dynamics.
Further complicating the outlook is the potential for a broader trade conflict between the US and China following the implementation of extensive tariffs. Industry sources warn that such measures could reduce trade volumes, placing additional strain on dry bulk freight rates.
As the dry bulk market navigates these uncertainties, stakeholders remain cautious, balancing expectations for a seasonal rebound with concerns over geopolitical developments and shifting demand trends.
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Source: S&P Global
