The recent tariff increases imposed by the US and China, effective from April 25, have considerable implications for dry bulk shipping, particularly impacting around 4% of dry bulk tonne mile demand. These adjustments are anticipated to hinder the growth of minor bulk cargo volumes, causing potential stagnation or even a decline in shipments to the US. Conversely, China is likely to turn to alternative sources for its dry bulk cargoes, prompting the US to explore other markets. Among the various dry bulk commodities, iron ore and coal shipments are projected to experience the weakest demand outlook.
With China’s domestic steel requirement declining, particularly due to challenges within its property sector, iron ore shipments are expected to plateau in 2025 and 2026. Similarly, coal shipments might see a decline of 2-3% in 2025 and 1-2% in 2026, largely influenced by the swift expansion of renewable energy capacity and heightened domestic coal production in China and India. On the supply side, a decline in freight rates could lead to reduced sailing speeds, allowing for fuel cost savings. Consequently, supply growth is expected to lag behind that of the dry bulk fleet.
Overall, ship demand is anticipated to stagnate in 2025, with a growth of 1-2% in 2026. Meanwhile, ship supply is projected to increase by 1.5-2.5% in 2025 and 2-3% in 2026. The weaker supply-demand dynamic may also impact asset prices, resulting in a potential decrease in second-hand ship prices and a continued decline in newbuilding prices. Furthermore, disruptions in ship routes, particularly in the Red Sea region, may exacerbate the demand outlook, potentially leading to a worse scenario than initially forecasted.
In summary, the dry bulk shipping sector is facing significant challenges driven by tariff rises and shifting market demands, signaling a period of lower freight rates and fluctuating asset values ahead.