By Ulf Bergman
After reaching a high for the year in mid-May, the Baltic Exchange’s panamax index spent a month facing significant headwinds. However, a partial recovery has seen the gauge gain around ten per cent over the past month, putting it about sixteen per cent above the reading at the same time last year.
Robust cargo volumes across the panamax and post-panamax segments in the first half of the year contributed to the strong performance. The aggregate global exports shipped on panamax vessels rose by five per cent in the first six months, compared with the same period last year. The positive development continued the recent years’ growth, placing it between the seven per cent recorded in 2024 and the three per cent last year.
Coal Supported Global Panamax Volumes
According to data from Signal Ocean, 721 million tonnes of dry bulk commodities were shipped onboard panamax and post-panamax vessels over the past six months. Coal accounted for 56 per cent of total volumes, slightly above the average over the past few years. Grains, as usual, were a distant second at nineteen per cent, broadly in line with the average share.
However, a closer look at the data reveals that developments were far from linear throughout the first half of the year. Monthly year-on-year growth was generally strong or very strong. Still, a sharp 5.4 per cent decline in March weighed on the average, as disruptions and concerns about economic growth dampened demand in the immediate aftermath of the first US and Israeli attacks on Iran.
Regarding the impact of individual cargo types, both coal and grain cargo volumes recorded an eight per cent year-on-year increase over the past six months. Given their aggregate share of around three-quarters of the trade, they accounted for most of the developments over the period. In contrast, iron ore and bauxite recorded declines of two and seventeen per cent, respectively. However, the overall impact was limited, as these commodities account for only a small share of the panamax trade.
The two leading commodities in the trade experienced diverging fortunes over the past six months. Coal began the year on a firm footing, with solid year-on-year growth in January, but the following three months saw momentum lost and volumes broadly in line with last year. Disruptions to the global flow of oil, amid the near-total closure of the Strait of Hormuz, persisted through May and June. Substitution effects are likely to have contributed to the resulting solid year-on-year growth in coal volumes, which were 11.2 per cent higher in the former month and 20.7 per cent in the latter. In contrast, grains recorded a modest decline over the past month, following mid- to high-teens expansions in April and May. The diverging fortunes for the dominating cargo types highlighted the importance of China for the panamax trade.
Chinese Demand the Key Driver for Seaborne Panamax Volumes
Changes in Chinese demand accounted for much of the recent ups and downs in panamax volumes. The past two months’ year-on-year growth in coal exports on board panamax vessels has largely been driven by greater demand for the fossil fuel from Chinese importers, following significant disruptions to the country’s crude oil imports from the Middle East. In May, the rise in coal shipments to China accounted for 56 per cent of the year-on-year growth. Last month, the Chinese impact was even greater, with coal shipments to China accounting for 77 per cent of the growth. However, the contribution to global tonne-mile demand is limited, as much of the coal is sourced from Indonesia and, to a lesser extent, Australia.
For the other significant cargo type, grains, the Chinese contribution was more mixed. Following a strong showing in May, grain exports on panamaxes bound for China fell 14.4 per cent in June, compared with the same month last year. Still, despite last month’s weakness, the aggregate for the first half of the year was just shy of ten per cent higher than in 2025, with US purchases recovering.
Second Half Volumes to Remain Exposed to Chinese Developments
Panamax cargo volumes are typically higher in the second half of the year than in the preceding six months. Over the past three years, the increase has ranged from six to thirteen per cent, with the coal trade driving much of the higher demand for seaborne transportation. The increase between the two halves has also been trending higher over the past few years. At this point, there is precious little to suggest that the relationship is due for a breakdown. However, the extensive reliance on China is a source of risk.
Continued disruptions to crude oil flows from the Arabian Gulf, amid the renewed effective closure of the Strait of Hormuz, will continue to support demand for seaborne coal. The renewed escalation of hostilities between the US and Iran highlights how volatile the situation is and how difficult it is to form any rational expectations about a return to something resembling normality. Even if a deal for lasting peace could be found in the not-too-distant future, it will take considerable time to get the oil trade moving again. This lag between any political resolution and an actual normalisation of oil flows suggests the coal substitution trade should remain healthy for the coming months, supporting panamax demand.
In contrast, the grains trade may provide less support for panamax demand. Last year, the volumes shipped in the second half were broadly in line with those of the first six months. Compounding this, the USDA projects that global grains exports will decline over the coming marketing year, potentially offsetting some of the demand in the coal trade. However, should Chinese demand for US grains continue to recover, longer voyages will offer some mitigation.
Hence, given coal’s dominance in the panamax trade, there is upside potential for freight rates in the segment, but not without risks. A quick resolution to the situation in the Strait of Hormuz and a loss of momentum in Chinese purchases of US agricultural commodities would provide headwinds to a seasonal recovery in the coming months.
Data source: Ocean Analytics