- Capesize tonne-day demand saw strong Q2 growth, especially on Atlantic–Far East routes, but freight rates on the Brazil–China (C3) route declined amid rising supply and weak iron ore fundamentals.
- Iron ore prices face persistent headwinds due to oversupply, China’s slowing industrial activity, and structural weakness in the property sector.
- Freight rates across Panamax and Supramax segments also softened, while port congestion in North China, especially Tianjin, continues to rise.
Tonne-day demand in the Capesize sector continued to rise through Q2 2025, with particular strength on voyages from the Atlantic Americas to the Far East. Despite this, freight rates on the key C3 route (Brazil to China) saw a downward correction this week as ballast vessel activity in the South Atlantic surged, raising fears of an oversupplied market.
The number of ballasters in the region reached 270, while daily loaded volumes hovered at a modest 1.1 million tonnes. C3 freight rates slipped to $23/tonne, while the C5 route (Australia to China) stood at $10/tonne, both reflecting increased pressure from vessel availability, according to American Journal of Transportation.
Iron Ore Market Faces Multi-Layered Headwinds
Adding to freight market uncertainty, Rio Tinto posted its weakest H1 profit in five years at $4.81 billion—a 16% year-on-year drop—citing softer iron ore prices and elevated supply from Australia, Brazil, and South Africa. Although overall iron ore production remains high, Vale has reduced its high-grade pellet output, reflecting some market recalibration.
However, China’s persistent manufacturing contraction, with PMI at 49.3 in June, coupled with seasonal slowdowns and structural weaknesses in the construction sector, continue to weigh on steel and iron ore demand. New residential construction starts dropped ~24% YoY in Q1 2025, and iron ore port inventories swelled to 133–136 million tonnes—12% above the five-year average—highlighting subdued offtake.
Panamax and Supramax Segments Also Weaken
Panamax rates on ECSA–Far East and USG–China routes declined by 7% and 5% respectively this week. Although loaded volumes from East Coast South America remain firm, ballast counts are trending downward but still sit above 200.
In the Supramax segment, rates from the U.S. Gulf to the Far East dropped to $40/tonne, while ECSA–Far East fell further to $36/tonne. Volumes loaded from USG/USEC dipped below 0.3 million tonnes, but a reduction in vessel supply after the June spike has offered limited support.
Supply Builds Across Vessel Classes
- Capesize: Ballast availability in the Atlantic climbed, with a 40% rise in the North and 18% in the South. In contrast, supply dropped by 12% week-on-week in the Indian Ocean and South Africa.
- Panamax: Australasia ballast activity surged 28% WoW, signaling an oversupplied Pacific, while the South Atlantic and North Atlantic saw mixed changes of –10% and +8%, respectively.
- Supramax: Oversupply intensified across both Atlantic and Pacific basins. The South Atlantic saw a 25% rise in ballasters, and the Indian Ocean, Far East, and Australasia all posted 12%–15% increases.
- Handysize: Ballast numbers rose across key regions—+15% in the North Atlantic, +11% in the Far East/NOPAC, and +20% in Australasia—signaling worsening oversupply.
Steel Cargo Ton-Days Hit Three-Year High
Demand for steel cargoes, tracked via tonne-day metrics, continues to climb, surpassing Q2 2023 levels and reaching a three-year high. With a 70% increase compared to late July 2023, the Supramax sector is expected to play a growing role in this trade going forward.
Rising Congestion in North China, Led by Tianjin
Port congestion for Supramax vessels in North China is on the rise, with Tianjin topping the list. As of July 28, congestion stood at 5.5% of the fleet, up from 4.5% in recent months and exceeding levels from the same period in 2023 and 2024. Although the Baltic Supramax Index remains elevated compared to early 2025, congestion has not yet caused a market surge.
The overall freight market shows signs of structural oversupply and fragile demand, especially as macroeconomic signals from China remain muted and seasonal constraints persist. Market participants remain cautious heading into Q3.
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Source: American Journal of Transportation
