- Vessel demand to outpace supply growth, tightening market balance
- Peak coal demand, steady iron ore flows to lend firm support to freights
Global freight markets have witnessed heightened volatility in recent times amid geopolitical uncertainties. With tari-driven disruptions intensifying and decarbonisation gaining momentum, how is the dry bulk market shaping up? How are shifting supply-demand dynamics influencing freight sentiment? In an exclusive conversation, Rahul Sharan, Deputy Director – Bulk Research, Drewry Shipping, shares his views on freight volatility, changing trade routes, and what’s next for global shipping.
Excerpts follow.
Q1. How do you see the dry bulk shipping market shaping up over the next six months of this current financial year, particularly for iron ore and coal trade routes?
A. The fundamentals remain strong and should support charter rates. That said, the market usually softens in the fourth and first quarters [of the calendar year] because of holiday slowdowns in the West and the Chinese New Year lull, so we could see a dip in Q4CY’25 and Q1CY’26 before recovery thereafter. Iron ore routes will broadly follow these seasonal patterns, while coal routes may perform better over the next six months, helped by higher winter demand, especially if North America and Europe experience a colder winter.
Q2. What, in your view, are the key factors currently driving volatility in freights — fuel prices, trade flows, or vessel positioning?
A. Vessel positioning can certainly drive short-term volatility in specific regions, but in the longer run, it is shifting trade lanes, fluctuating import demand, and policy uncertainties such as tari s that play a bigger role. Fuel prices add another layer of unpredictability, especially with upcoming environmental regulations influencing operating costs. Together, these factors create a dynamic market where both structural changes and immediate supply demand mismatches drive freight swings.
Q3. With a steady inflow of new builds and scrapping at relatively muted levels, how do you assess the balance between vessel demand and availability in the near term?
A. The dry bulk fleet is set to grow by about 2.7% in 2025 compared with 2024, but growth will slow further to around 2% in 2026, with less than 30 million deadweight tonnage (dwt) scheduled for delivery and about 5 million dwt expected to be scrapped. This points to relatively low fleet expansion. At the same time, trade demand is projected to rise by over 3% in 2026, suggesting that vessel demand will outpace supply growth, which should lend support to market balance in the near term.
Q4. Given China’s influence on bulk commodities, how are shifting steel production policies and raw material buying likely to a ect vessel demand and freight dynamics?
A. It is still too early to suggest that China’s steel production policies will cause a major near-term shift in dry bulk demand. Steel output in China is expected to remain the primary driver of iron ore and coking coal imports and, thus, of dry bulk trade, at least in the short term. Any substantial changes — whether through production curbs, decarbonisation policies, or diversification of supply — are likely to play out gradually over the longer term rather than immediately.
Q5. How are decarbonisation measures and the shift towards alternative fuels impacting operating costs and freight market behaviour?
A. The share of dual-fuel vessels in the order book is rising quickly, but these new builds come at a significant premium compared with conventionally fuelled ships. At the same time, carbon-related costs are increasingly shaping operating expenses — ships calling at Europe are already subject to the EU Emissions Trading System (ETS), and other decarbonisation measures are expected to add further cost pressures. As a result, operating expenses are trending higher, and this is gradually influencing freight market behaviour, as charterers weigh the trade-offs between lower-emission vessels and higher rate expectations.
Q6. To what extent are geopolitical tensions and trade disruptions shaping current freight market sentiment?
A. Geopolitical tensions and trade disruptions are currently the biggest drivers of market sentiment. Uncertainty over tari s and shifting trade flows have weighed heavily on dry bulk demand and freights through 2025 so far. That said, much of this ambiguity should ease over the next six months, which could unlock stronger vessel demand and provide some stability to the market.
Q7. How do you see the role of forward freight agreements (FFAs) evolving in today’s environment? Are they a reliable and leading indicator of sentiment and rate direction?
A. At Drewry, we track FFAs closely and analyse how demand dynamics translate into FFA rates and volumes. They remain a useful leading indicator of freight market movements. However, in today’s volatile environment, FFAs can at times reflect market sentiment more than underlying fundamentals, so they should be viewed as a guide rather than a perfect predictor.
Q8. What seasonal trends do you expect in the coming months, particularly with the peak grain and coal demand cycles overlapping with iron ore shipments?
A. Iron ore demand looks fundamentally strong, with infrastructure and construction activity across the globe keeping shipments elevated. Coal demand is also expected to rise, particularly from emerging markets such as India and Vietnam, where power generation needs remain robust. The overlap of peak coal demand with steady iron ore flows should provide firm support to freight markets in the coming months. This strength is likely to compensate for any seasonal slowdown in grain exports, ensuring that overall vessel demand remains healthy.
Q9. How do you see shipowners and operators adjusting their fleet strategies? Are they leaning more towards new-build investments, long-term charters, or a wait-and-watch approach?
A. New-building investments are largely on hold for now, with shipowners adopting a wait-and-watch approach. Uncertainty around future fuel choices and even yard availability — especially in the context of the recent US Trade Representative (USTR) proposal — has added to the hesitation. As a result, many owners are deferring long-term strategies and focusing instead on short-term flexibility until there is greater clarity on regulations and technology pathways.
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