Freight News, Logistics

Tariffs to Drive Weaker Dry Bulk Demand, BIMCO

[ May 1, 2025   //   Gary Burrows ]

Dry bulk’s supply/demand balance will weaken in 2025 and 2026 due to the U.S.-China tariff tit-for-tats, according to international shipping association BIMCO.

            Tariff increases are expected to directly affect 4 percent of dry bulk tonne-mile demand, as shipments to the U.S. may stagnate or decrease. China, on the contrary, is expected to increase purchases of dry bulk cargoes from other countries, leading the U.S. to seek alternative markets.

            “Since our last update, a change in U.S. trade policy has led to a deterioration in the economic outlook and an increase in uncertainty. Consequently, we have cut cargo demand growth by 0.5 percentage points in 2025 and 2026,” said Filipe Gouveia, shipping analysis manager at BIMCO.

            The demand outlook is weakest for iron ore and coal shipments, the two largest dry bulk commodities, BIMCO said. Iron ore shipments are expected to stagnate in 2025 and 2026, as Chinese domestic steel demand slips, partly due to China’s property sector crisis. Coal shipments are estimated to drop 2 percent to 3 percent in 2025 and 1 percent to 2 percent in 2026, amid rapid deployment of renewable energy capacity and stronger domestic coal mining in China and India, the two largest importers.

            On the supply side, BIMCO expects lower freight rates could lead to a decrease in sailing speeds to shave fuel costs, resulting in a slower rate of growth than the dry bulk fleet.

            Overall, ship demand is estimated to stagnate in 2025 and grow 1 percent to 2 percent in 2026, compared with ship supply growth of 1.5 percent to 2.5 percent in 2025 and 2 percent to 3 percent in 2026.

            “Amid a poorer outlook for the dry bulk market, we expect that freight rates will remain lower in 2025 and 2026, than in 2024,” Gouveia said. “We forecast that the outlook for the panamax segment will be the weakest, as coal accounts for over half of the cargo it transports. Conversely, low fleet growth in the capesize segment could keep that segment’s freight rates higher compared to other segments.”

            The weaker supply/demand outlook should also impact asset prices. Amid weaker freight rates, second-hand ship prices could weaken. Newbuilding prices have fallen since the start of the year, and BIMCO does not expect them to revert to previous highs.

            BIMCO’s update assumes ships remaining unable to fully return to the Red Sea during the current and next year and reroutings via the Cape of Good Hope will continue. The full return of ships would be equivalent to a 2 percent decrease in ship demand. If this occurs, the demand outlook will be weaker than our baseline forecast, Gouveia said.

BIMCO said weaker supply/demand outlook should also impact asset prices. PHOTO: BIMCO

Tags: BIMCO, Filipe Gouveia