With demand steady and fleet growth at record lows, Capesize earnings could defy expectations.
For the copy, as always, Thanos Sofios
As in all industries, demand and supply drive and define the price. The price in shipping is the freight rate. Freight rates are quoted on USD/day, reflecting how much it costs daily to lease a specific ship.
So, demand for the main commodities and supply of ships that are available for transporting these commodities define freight rates.
“While short-term volatility continues to be shaped by cautious economic sentiment and evolving trade policy uncertainty, the longer-term Capesize fundamentals remain firmly positive.
The primary reason is highly constrained vessel supply growth combined with steady and resilient demand for major dry bulk commodities.
Vessel Supply
On the supply side, the Capesize and Newcastlemax order book is currently slightly below 8%, one of the lowest levels historically, especially significant given the increasing demand for fleet renewal due to tightening environmental regulations. Approximately 10% of the existing fleet is over 20 years old and becoming less and less competitive due to the rising cost of environmental compliance. New orders remain limited due to constrained yard capacity, high newbuilding prices, and uncertainty about propulsion technology. Only 6 new Capesize and Newcastlemax orders have been placed year-to-date compared to 77 for all of 2024.
Net fleet growth is expected at just 1.5% in 2025 and 1.9% in 2026. Factoring in increased drydocking, effective growth may be even negative during the year. Vessel speeds have stayed historically low due to EEXI and CII regulations and are expected to remain subdued further, reducing the effective supply. Taken together, this points to minimal net fleet growth for several years, creating a very supportive environment for Capesize earnings.
Demand for transportation
On the demand side, global steel demand remains resilient. Although China’s steel production is nearly flat year-on-year, iron ore imports are growing due to depletion of domestic mines and a pivot towards higher-grade imported ore. Australia’s iron ore exports were disrupted early in the year by severe flooding and cyclones, with year-to-date volumes down 2.6%.
However, miners have reaffirmed 2025 export guidance, pointing to a significant upside for the rest of the year. Brazilian iron ore exports are up 4.6% year-to-date despite the high base from Q1 2024. The peak export season from May to November is now starting, adding to the relevant momentum. Vale of Brazil continues to deliver on efficiency gains and high-grade iron ore output, which bodes well for long-term export growth. Since Brazilian cargoes require triple the tonnage of Australian cargoes, the impact on Capesize demand is magnified. The Simandou iron ore project in Guinea remains on track to start exports in November 2025. With one of the lowest-cost structures globally, Simandou is a game-changer for long-haul, premium-grade Capesize-exclusive trade.
A key structural opportunity
Iron ore ton miles are expected to grow by about 5% annually in both 2026 and 2027. Guinea’s exports of bauxite are up 43% year-to-date. Full-year production is expected to reach 200 million tons, up from 145 million tons in 2024, driven by aluminum demand. Thermal coal imports dropped around 8% year-to-date as inventories started high and hydropower generation surged in China. However, as stockpiles normalize, seasonal demand is expected to rebound in the second half of the year.
Taken together, demand across all major Capesize commodities and raw materials remains robust and well-supported by global infrastructure, energy consumption, and manufacturing needs. With extremely low fleet growth and structural efficiencies, such as slow speeds and increased dry dockings, Capesize utilization is projected to tighten progressively.”
Note: The above insight is part of Stamatis Tsantanis opening statement during Seanergy Maritime Holdings Corp. Q1 2025 Earnings Call, last week. Stamatis is the Chairman and CEO of Seanergy (NASDAQ: SHIP), the only pure-play Capesize shipping company listed in the US capital markets.