- Decoupling accelerates as US returns to tariff-driven policy stance.
- Dry bulk market grapples with freight volatility, supply overhang, and trade uncertainty.
- Tanker attacks and shifting trade routes revive Red Sea war risk premiums
The rapid pace of global events in recent months is reshaping alliances and rewriting the rules of international trade. As military and economic confrontations overlap, countries are re-evaluating their positions. Iran remains central to China’s Belt and Road ambitions due to its strategic location and energy assets, but its ongoing conflict with Israel threatens the broader Middle Eastern logistics chain. Meanwhile, the US has adopted a firmer stance on global trade, targeting both allies and rivals with sweeping tariff adjustments, according to Breakwave Advisors.
Tariff Surge Signals US Policy Realignment
The reimposition of US tariffs—many reaching up to 40%—signals a shift toward “fair trade” and stricter enforcement. Recent announcements included duties on Vietnamese exports and rerouted Chinese goods, with new levies on Brazilian imports and copper as well. President Trump has warned further tariffs could follow, including on countries aligning with BRICS policies. While bilateral negotiations remain possible, few expect long-term trade deals in the near term.
Rare Earths Highlight Limits of Decoupling
Despite this confrontational posture, the complexity of global interdependence remains clear. The US recently reached a conditional rare earth supply deal with China, underscoring how difficult it is to fully decouple. In return, Washington offered to ease export controls on ethane, chip-design software, and aerospace components. These arrangements suggest that the future of US-China trade will feature short-term compromises, not stable agreements.
Freight Faces Economic Headwinds
Uncertainty is beginning to drag on global confidence and economic activity, just as the dry bulk sector enters a period of high fleet deliveries. Between 2021 and 2024, the industry was lauded for restraint in ordering new ships—but this balance is now being challenged by slowing demand, particularly in coal and grain trades. This shift comes as 2025 tonnage deliveries continue to rise and peak in 2026.
Capesize Volatility Fades Quickly
After months of low volatility, Capesize rates surged to over $30,000/day on June 16, only to fall back below $18,000/day by the end of the month. The brief spike was linked to the Israel–Iran conflict, but the dry bulk sector has since cooled. The year-to-date average stands at $15,794/day—better than 2023 but still well below 2024’s $23,482/day. Sub-Capesize vessels posted similarly soft results:
- Panamax P5TC: $10,701/day (vs. $11,772 in 2023)
- Supramax S10TC: $9,209/day (vs. $10,457 in 2023)
- Handysize HS7TC: $9,813/day (vs. $10,047 in 2023)
Distance Compression Pressures Rates
Even as vessel speeds decline, growth in tonne-days has lagged behind tonnage growth. Key reasons include shorter-haul grain trades shifting away from China and improved Panama Canal laden transits. These factors, combined with steady vessel deliveries and limited scrapping, are compressing voyage distances and exerting downward pressure on earnings.
Tariffs Reshape US-China Grain Trade
Since April, US soybean exports to China face a combined 44% tariff. This has accelerated a downward trend in volumes and raised concerns about the impact on Panamax/Kamsarmax earnings during the upcoming harvest season. Whether a diplomatic breakthrough could revive this trade remains uncertain.
Red Sea Security Deteriorates Again
The resurgence of Houthi attacks, including the sinking of multiple bulkers in July, has once again disrupted Red Sea traffic. While the shipping community had hoped for stabilization, war risk insurance premiums have surged—more than doubling in some cases to 0.7% of hull and machinery value. Israel has responded with airstrikes on Houthi-held territories, escalating the regional tension.
The dry bulk market now faces the dual challenge of navigating trade distortions from tariffs and safety risks from geopolitical instability. As supply pressures mount and voyage distances shrink, owners may find themselves in a prolonged balancing act—between low cargo demand and route disruptions that could temporarily lift rates.
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Source: Breakwave Advisors