Following a half year hibernation, Panamax freight rates have finally woken up. Freight rates have risen noticeably across all routes, while the transatlantic P1A route has undoubtedly stood out. This may be linked to the perception of the impact of USTR policies on the fundamental future dynamics of the shipping market. In February 2025, the USTR released a Section 301 proposal targeting Chinese shipping, logistics, and shipbuilding industries, announcing that starting from mid-October 2025, shipowners and operators of China-linked vessels calling at US ports would be subject to levies. Although these regulations remain proposals and are open to potential significant change (especially concerning their introduction date), they have undeniably shaken dry bulker markets.
As of 18 July, P1A closed at $20,900/day, up 143% from the June low ($8,614/day on 2 June). In comparison, the Pacific market's P3A and P6 routes increased by 69% and 49%, reaching $14,636 and $16,182/day, respectively. The premium of P1A over P5TC reached 22%, marking the highest level in the past year. Since the launch of the Baltic Panamax Index basis 82,000 Dwt Kamsarmax in 2018, the average of P1A is 4.4% lower than P5TC.
This surge reflects the market's response to fundamental shifts driven by the USTR's influence, providing strong support for the rally from both the supply and demand sides. With geopolitical tensions apparently not abating, and uncertainty over US-China trade relationship, the USTR’s proposed policies targeting China’s maritime sector are reshaping the global shipping landscape faster than expected.
On the supply side, a sudden tightening of vessel supply in the transatlantic market forced charterers to swiftly accept higher rates offered by shipowners. Behind this surge lies a subtle shift in the vessel preference changes among charterers: Even though the USTR (US Trade Representative) policies have not yet come into effect—and even if they are implemented under the current framework—they would not directly impact Chinese-linked vessels ballasting to the United States.
Nonetheless, anecdotal observations suggest that the chartering market has already begun to voluntarily avoid vessels built in Chinese shipyards or owned by Chinese beneficial owners under Annex I and II of the USTR proposal, leading to a rapid decline in the participation of Chinese-linked vessels in transatlantic trade. This phenomenon of "preemptive sanctions" is reshaping deployment patterns and reducing available tonnage in the Atlantic market. While the policies have yet to be officially enforced , the panic and supply chain reconfiguration they triggered have already spread through the global shipping market and has been translated into a market surge.
According to AXSMarine data on Panamax (68,000-85,000 DWT) trade flows, in 2Q25, the share of China-built vessels in transatlantic dry bulk trade (by Dwt) fell sharply from the 2021–2024 average of 46.9% to just 38.6%. Similarly, the share of vessels owned by Chinese beneficial owners dropped from a 21.7% average (2021–2024) to 13.5% in 2Q25. When looking only at US port calls, the declines are even starker: from averages of 45.7% (China-built) and 22.3% (Chinese Beneficial Owner) have plunged to 29% and 6.9%, respectively.
This trend of “self-decoupling” is spreading beyond US-linked routes. In transatlantic trade, where the US is the largest export source (accounting for over 40% of Panamax exports according to AXSMarine), the declining favorability of China-linked vessels among charterers significantly reduces their ability to secure cargoes, resulting in a marked decline in their participation across the transatlantic market.
On the demand side, the US exhibits a clear seasonality in its exports, with the fourth quarter being the peak export season due to the grain harvest. Export volumes then decline progressively in the following calendar quarters. In recent months, fresh procurement developments driven by the decoupling of China-US trade has sharply increased US exports to Europe, shifting the demand structure of the transatlantic route.
Although the China-US Geneva Joint Statement removed most tariffs, China’s 15% tariffs on US coal and grain remain (in response to US tariffs on Chinese fentanyl), which has significantly altered global dry bulk trade flows. Against this backdrop, we observe the US actively seeking new export markets—including Europe—to absorb volumes that would otherwise have been purchased by China. According to AXSMarine data, in 1H25, US exports to China plunged from 14.6 mln mt to 8.0 mln mt, while exports to other regions rose across the board: Europe increased by 2.6 mln mt to 8.1 mln mt, while volumes shipped to major ‘Other’ Asian countries (Japan/South Korea/India) rose by 6.3 mln mt to 18.6 million mt, and other countries increased by 4 mln mt to 15.8 mln mt.
In summary, amid shifting fundamentals in the shipping market, fleets that were once flexibly deployed are now split into two separate pools by policy expectations, reducing overall transport efficiency. A man-made barrier has formed between China-linked and non-China-linked vessels. For Chinese vessels, they appear to be perceived as no longer suitable for the Atlantic market. Accordingly, they now appear to be increasingly chasing Pacific and China-Brazil/West Africa trades. Meanwhile, non-China-linked vessels have tended to stay in the Atlantic to capitalize on premium rates. This divide prevents vessels from freely flowing based on ‘free hand of the market’.
While the effective reduction in available tonnage has, to some extent, supported the freight of all Panamax routes, this is largely driven by market expectations and speculations around future policy. Going forward, the geopolitical dynamics, not only between China and the US, but also new potential tariff conflicts between the US and other countries (Europe for instance), will play a key role in shaping the global shipping market. Consequently, these supply-demand shifts, driven by political maneuvering, warrant close attention from market participants.