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Dry bulk market freight rates are showing signs of improvement

Dry bulk market freight rates are showing signs of improvement after a period of decline. The Baltic Exchange TC averages began to slow down in the last five months of 2024, with a more pronounced drop in the weeks leading up to and following the Chinese New Year. The Cape 5TC, for instance, hit its lowest point on February 12, 2025, at $5,899/day, but has since improved by about 22%, reaching $7,187/day. Similarly, the Panamax 5TC reached its lowest on January 28, 2025, at $6,736/day, and has surged by 48% to $9,932/day. The Supramax 11TC saw a 54% rebound, moving from its lowest rate of $5,575/day on February 3, 2025, to $8,572/day. The Handymax 7TC also saw a 38% increase from its low of $6,679/day on January 28, 2025, to $9,205/day. Despite these positive trends, China's dry bulk imports, which experienced strong growth in 2023-2024, are not expected to replicate the same performance. While recent stimulus measures in China have improved economic sentiment, they are unlikely to drive a significant boost in dry bulk demand, especially with high stockpiles of key commodities. The market remains cautious as these dynamics unfold.

In January, Russian crude deliveries to China's independent refineries remained steady despite the expansion of US sanctions and a ban by the Shandong Port Group on sanctioned vessels. The total volume of crude, including ESPO, Sokol, Urals, and Sakhalin Blend, was nearly unchanged from December at 2.37 million mt. However, volumes are expected to decline in February as surging freight prices discourage smaller refineries from purchasing Russian crude. While the sanctions have had a limited immediate impact compared to those on Iranian imports, Russian crude shipments are being redirected to alternative ports and facing logistical challenges. Freight rates for Russian crude to China saw significant fluctuations in January, but have since stabilized. Some Russian crude shipments are now being offloaded at private terminals to bypass the Shandong Port ban. Meanwhile, ESPO cargoes have risen in popularity, although high premiums are deterring independent refiners. Looking ahead, freight rates are expected to ease, which could help sustain Russian crude exports to into China. Despite disruptions, Russian crude remains an important supply source, though challenges, including ongoing sanctions and logistical bottlenecks, continue to affect the market.

Shipping companies are continuing to avoid the Red Sea due to safety concerns and commercial factors, even as some players return. Houthi militants in Yemen have attacked over 130 ships since the outbreak of the Israel-Hamas war in October 2023, prompting most vessels to take longer routes around Africa instead of transiting the Suez Canal. Although the Houthis pledged to cease attacks under a January 2025 ceasefire, ship traffic through the Bab al-Mandab Strait remains significantly below prewar levels. The additional war risk premiums for ships transiting the Red Sea have surged from 0.05% to 1% of hull value, further deterring operators from returning to the region. These diversions have caused notable increases in ton-mile demand: 4.5% for dry bulk carriers, 7.5% for product tankers, and 17% for container ships. Some sectors also have commercial incentives not to return to the Suez Canal. Tanker rates spiked early in 2024 due to diversions, though they have since fallen back to prewar levels. CMA CGM, however, announced a new weekly service via the Red Sea, citing improved stability. The EU's naval operation in the region will continue until at least February 2026. Despite these developments, security in the region remains uncertain.

S&P activity:

Dry:

On the Newcastlemax sector, the "HL Frontier" - 208K/2010 Universal was sold for USD 32.5 mills basis delivery in May with SS/DD due. The Post-Panamax "Cora Oldendorff" - 93K/2012 Taizhou Catic was sold for USD 13.8 mills to Chinese buyers, while the Post-Panamax "Petalon" - 87K/2010 Hudong Zhonghua was also sold to Chinese for USD 10.9 mills. Chinese buyers acquired also the Kamsarmax "Ellina" - 83K/2008 Tsuneishi Zhoushan for USD 12.75 mills. On the Supramax sector the OHBS "Pacific Infinity" - 56K/2012 Oshima changed hands for USD 16.85 mills, whilst the "Evropi"- 54K/2005 Xiamen found new owners for 7.5 mills. Last but not least, Greek buyers acquired the Handysize "DL Marigold"- 34K/2012 Samjin and the "DL Tulip" - 34K/2012 Samjin were sold for high USD 9 mills each.

Tanker:

The tanker S&P activity remains subdued with only 3 sales to report. The Suezmax "Zeno I"- 152K/2003 HHI changed hand for excess USD 20 mills. The MR2 "PS Augusta" - 51K/2011 STX was sold for USD 26 mills to UAE buyers.

Xclusiv Shipbrokers Inc.