The Capesize market has seen positive gains this year, driven largely by increased ton-mile demand from higher Atlantic fronthaul trade volumes, as well as diversions around the Cape of Good Hope due to disruptions at the Panama and Suez Canals. Meanwhile, the Panamax segment has benefited from the unexpectedly strong coal and grain trade volumes, with additional support from the canal disruptions as well.
Some factors could continue to fuel freight market growth next year. Strong ton-mile demand from increased Atlantic fronthaul trades is expected to persist, exemplified by rising Colombian coal exports and robust bauxite shipments from Guinea to the Pacific. Additionally, high-quality iron ore from the Simandou project could begin flowing to the Far East in 2025, potentially ramping up to 60 million tons per year over 30 months.
At the same time, tighter tonnage availability could emerge in certain regions, due to continued disruptions in the Red Sea, as well as stricter environmental regulations and reduced import demand in Europe. The supply of tonnage could also be affected by an anticipated increase in drydocking activity, as more vessels reach 15 years old in 2025. Moreover, an expected slowdown in overall Capesize fleet growth in the coming years could further benefit the Capesize segment.
China’s stimulus measures, introduced since late September, could also support sentiment and demand, particularly as the country braces for a potential escalation in the U.S.-China trade war. Chinese buyers may also frontload U.S. grain purchases ahead of Trump’s inauguration on January 20, in anticipation of potential policy changes. Additionally, strong steel trade volumes from the Far East — driven by overcapacity — could provide ongoing support to demand, although the longer-term outlook remains uncertain due to the potential for increased protectionism in importing countries.
However, the freight market also faces several potential limiters. Iron ore exports may weaken in the remaining months of 2024 due to extended maintenance at the CPBS terminal in Brazil, with a further decline expected in early 2025 due to their rainy season. Lower iron ore prices might also threaten the economic viability of exports from swing suppliers such as India and Ukraine. Meanwhile, China’s stimulus efforts may not fully support commodity demand, given that they are primarily aimed at boosting consumption rather than infrastructure and construction activity.
Pressure on China’s coal imports is rising as the country advances its renewable energy capacity and increases domestic coal production, alongside significant land-based imports from Mongolia. Similarly, India’s rising coal production, improved domestic rail logistics, and large stockpiles could reduce its coal import demand. Although the La Niña event now seems unlikely, or a mild one even if it emerges, any weather disruptions from it could still affect commodity exports from areas such as East Australia, Colombia, and Northern Brazil.
While the Capesize and Panamax markets have benefited this year from stronger Atlantic trade volumes and increased diversions, concerns about a potential slowdown in demand growth remain as we head into next year. Despite recent stimulus measures, Chinese demand prospects remain uncertain, and some of the upside we have seen this year may fade as the Panama Canal traffic normalizes. The coal and grain trades are expected to weaken in 2025, and rising protectionism could impact the steel and grain markets. However, tighter tonnage supply in the Capesize segment may offer a silver lining, helping to offset these challenges and provide continued support in the year ahead.
