This week’s market highlights offer an overview of recent trends in the dry bulk Capesize vessel segment and the tanker VLCC segment in early October, focusing on the interplay between vessel supply and freight rates.
DRY CAPESIZE
In early October, concerns over U.S. seaborne trade intensified due to an ongoing strike by dockworkers at 36 critical ports along the East and Gulf Coasts, including key hubs like Houston and New York. The strike, which began on October 1st, is causing significant delays in vessel loading and unloading, with an estimated economic impact of up to $4.5 billion per day. Congestion has been particularly severe for dry bulk vessels at the Port of New Orleans, where traffic surged by 190% monthly and 13% weekly, affecting Handysize and Supramax vessels the most. In the dry bulk freight market, the Brazil-to-China route showed signs of softening, although optimism remains due to positive developments in China’s economy, especially in the iron ore market. Iron ore prices on the Singapore exchange surged above $110 per tonne at the start of the week, up from $102 on Friday, fueled by China’s efforts to revive its struggling property sector. Supply tightening in the South Atlantic persists as the number of ballasters continues to decline. Baltic rates are also seeking stability, with expectations of stronger demand compared to previous quarters. Freight rates for Capesize vessels for shipments from Brazil to North China were just under $27 per tonne, down 4% from the previous week but still 10% higher than the same period last year.
TANKER VLCC
The early days of October have been marked by escalating geopolitical tensions in the Middle East, raising concerns about a potential spike in oil prices as the region edges closer to broader conflict. Market participants are increasingly apprehensive about the near-term oil price outlook, especially as risks to key maritime routes grow. Ongoing Houthi attacks in the Red Sea have significantly disrupted seaborne oil trade, leading to a noticeable decline in vessel traffic through this vital passageway, heightening fears about shipment safety.
In contrast, the broader crude freight market remains buoyant, particularly on the AG-China route, driven by Chinese government stimulus measures aimed at enhancing economic recovery. These measures are expected to fuel strong energy demand in the coming months, instilling cautious optimism among market participants. As one of the largest global oil importers, China is likely to maintain steady energy consumption, which could help mitigate the geopolitical uncertainties weighing on the global market. As we look ahead in October, an analysis of the correlation between net supply evolution at the AG and WS rate performance—illustrated in the image above—indicates a continued decline in VLCC AG net supply, measured by the number of vessels. This trend supports a more optimistic sentiment in WS market rates.
However, the broader geopolitical landscape remains volatile. Any significant escalation in hostilities could disrupt the delicate balance between supply and demand, potentially causing oil prices to surge. Goldman Sachs cautions that international crude oil prices could rise by $20 per barrel if Iran’s oil supply is compromised due to escalating conflict in the Middle East. The interplay between geopolitical risks, maritime security, and economic policies will be crucial in determining the trajectory of oil prices and crude freight rates as the month unfolds.
