Q4 2025 Shipping Outlook — Strong Rates, Rising Oversupply Risk

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Mfame Editor
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  • Tanker Ton-Mile Demand Rises on Longer-Haul Crude Flows to Europe.
  • Efficiency and Electrification Weigh on Long-Term Oil Demand.
  • Tanker Deliveries Threaten Market Balance Beyond 2025.

The EU’s ban on Russian oil, along with ongoing diversions in the Suez Canal, has led to longer voyage distances and a tighter supply of vessels, which in turn is pushing freight rates higher. However, a significant shadow fleet is now transporting sanctioned oil from Russia, Iran, and Venezuela to Asia, effectively replacing traditional shipping tonnage. If sanctions are enforced more strictly, it could create opportunities for fleets that are compliant, reports VV Blog.

Tanker Market

  1. Geopolitics Driving Ton-Mile Demand: Disruptions in the Red Sea and EU sanctions have increased long-haul crude shipments from the Middle East, the US, and Latin America to Europe, resulting in a rise in ton-mile demand.
  2. Demand Growth Facing Long-Term Headwinds: Efficiency improvements, the shift towards electrification, and changes in behaviour, like the rise of remote work, suggest that transportation fuel demand may slow down in the future.
  3. Fleet Growth Risks Market Balance: With rising deliveries and limited scrapping, there could be pressure on utilisation rates after 2025, even with a moderate 16% orderbook.
  4. Contracting Volumes Declining: Tanker orders are currently 55% lower than in 2024, with significant drops in both the Product and Crude segments. However, demand for container vessels is keeping shipyards busy and prices elevated.
  5. China Anchors Demand: China’s oil imports continue to be the backbone of tanker demand, while India and other Asian economies are providing additional support.

Bulker Market

  1. Balanced Market Supports Solid Rates: Years of controlled fleet growth and steady demand have helped maintain firm Bulker freight rates, even amid global uncertainties.
  2. Ton-Mile Gains Offset Volume Declines: While iron ore and coal volumes are decreasing, longer-haul trades, especially the route from the Simandou mine in Guinea to China, and ongoing diversions in the Red Sea are balancing things out.
  3. China’s Steel Sector Weakens: A slowdown in real estate is dampening steel demand and imports, while exports are facing challenges from tariffs and trade actions.
  4. Energy Transition Reshapes Trade: The push for decarbonization is increasing minor bulk flows like bauxite, but it’s also leading to a decline in coal trade as renewable energy and domestic production rise in Asia.

Container Market

  1. Limited TEU-Mile Growth: In 2025, we can expect TEU-mile demand to grow by a modest 2.4%. This slow growth trend is likely to continue through 2028, primarily due to US tariffs and existing diversions that are limiting potential gains.
  2. Rates Firm but Set to Ease: Freight rates are holding strong, even with 4.3 million TEU deliveries coming in, thanks to slower sailing speeds. However, we anticipate a decline starting in 2026 as fleet growth begins to outstrip demand.
  3. Oversupply Looms: The fleet has been expanding at an average rate of nearly 10% in 2024, and this trend is expected to persist. With around 10 million TEU set to hit the waters in the coming years, we could be facing a significant supply surplus.

Gas Market

  1. Export Growth Sustains Momentum: In 2024, US LPG production and exports saw a significant uptick, bolstered by increased output from the Middle East and new LNG terminal projects expected to roll out through 2028.
  2. Rapid Fleet Expansion: The VLGC and VLAC fleets expanded by 10.9% in 2024, with robust growth continuing in both large and medium segments, thanks to previous ordering activity.
  3. Earnings Strong, Pressure Ahead: For 2025, VLGC rates are projected to average around USD 51,400 per day, driven by export growth. However, as new deliveries start coming in from 2027, the balance is likely to tighten.
  4. China Remains Key Driver: Asia’s LPG imports jumped by 11% in 2024, with China leading the charge with a remarkable 37% increase in US volumes. While we expect a slowdown in 2025, imports should bounce back with the introduction of new PDH capacity.
  5. Petrochemical Trade Still Weak: Global overcapacity and ongoing trade tensions are keeping US-to-Asia ethylene exports significantly down, although intra-Asia flows are providing some level of support.

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Source: VV Blog