Shipping Market Faces Turbulent Start to 2026
The shipping industry is experiencing a rocky beginning to 2026, marked by a significant drop in the Baltic Dry Index and sluggish trading activity across various routes. Early January saw a notable absence of capesize fixtures, with brokers reporting a lack of movement in the market. While some recovery has been observed, particularly in the panamax sector, concerns linger over the impact of geopolitical tensions and a slowing Chinese economy.
Market Dynamics and Index Fluctuations
The Baltic Dry Index, which serves as a key indicator of shipping costs, ended 2025 at 1,877 points and began January at 1,882 points. However, it quickly fell to a low of 1,532 points by January 15. A subsequent recovery brought the index back to 1,803 points, largely driven by activity in the panamax market, particularly in the north Pacific region. Increased trade between China and Canada has contributed to a 33% rise in day rates for this route, which now averages $12,899. However, the overall trading environment remains fragile, with ongoing political tensions, including threats of tariffs on Canadian exports to the U.S., adding to market uncertainty.
China’s steel production continues to decline, leading to a drop in iron ore prices. The dollar-per-tonne rate for shipments from Hedland to Qingdao fell from $10.10 in mid-December to $7.23 by January 15. Despite steady mining activity, per-day rates plummeted from $30,083 to $14,211 during the same period. A slight recovery has since occurred, with rates now at $8.63 per tonne and $21,529 per day for modern capesize vessels. The outlook remains cautious as the Lunar New Year approaches, with concerns about the weak Chinese economy and increasing bulk carrier supply looming large.
Freight Rate Challenges Across Vessel Sizes
January has proven particularly challenging for supramax and ultramax freight markets, with the S11 ultramax average dropping by 7% to $12,593 as of January 21. This decline is primarily attributed to a steep fall in rates for voyages originating from China. For instance, the route to West Africa has seen a 16% decrease, now averaging $9,500 per day. Similarly, coal shipments from Indonesia to India have dropped by 12%, with rates falling to $10,064 per day. The China-Indonesia coal run has also suffered, decreasing by 15% to $7,706 per day, although this is an improvement compared to last year’s lows.
Handysize bulker freight rates have also faced significant declines, with the H7 average down 13% to $10,698. The Atlantic market has been particularly hard hit, with backhaul rates to South America plummeting by 26% to $6,871 per day. Rates for fronthaul routes from Brazil to Europe and the U.S. Gulf have also decreased, reflecting the broader challenges in the market. Meanwhile, East of Suez, rates for North Pacific round voyages fell by 5% to $9,800 per day, while South Pacific routes dropped by 6% to $9,994 per day. The ongoing delay in the EU-U.S. trade deal, exacerbated by Greenland’s involvement, may further complicate the situation in the coming months.
