Shipping Market Faces Turbulence in January
The shipping industry has experienced a challenging start to 2026, with significant fluctuations in freight rates and market activity. Early January saw a notable lack of capesize fixtures, particularly on less liquid routes, leading to a sluggish market. However, a recovery began mid-month, driven by increased trade between China and Canada, despite ongoing concerns about the Chinese economy and rising supply of bulk carriers.
Market Recovery Amidst Political and Economic Challenges
The Baltic Dry Index, which measures shipping rates, began January at 1,882 points but fell to a low of 1,532 by January 15. Since then, it has rebounded to 1,803 points, primarily due to improvements in the panamax market. Increased trade between China and Canada has contributed to a 33% rise in day rates for panamax vessels on a 35 to 50-day round trip, although the current rate of $12,899 remains modest. This uptick coincides with political tensions, as former President Donald Trump has threatened to impose 100% tariffs on Canadian exports to the U.S., suggesting that political factors will continue to influence market dynamics throughout the year.
In China, steel production is slowing, which has impacted iron ore shipping rates. The dollar-per-tonne rate for iron ore from Hedland to Qingdao dropped from $10.10 in mid-December to $7.23 by January 15. Despite steady mining activity, per-day rates for shipping fell significantly, from $30,083 to $14,211. However, as tonnage has been absorbed, rates have started to recover, currently sitting at $8.63 per tonne and $21,529 per day for modern capesize vessels using low-sulfur fuel. The TCE for shipping iron ore from Brazil to China also saw a decline, dropping from nearly $30,000 per day in late December to $17,386 by mid-January, before recovering slightly to $22,027.
Freight Rates Decline Across Multiple Vessel Sizes
The supramax and ultramax freight markets have faced significant declines in January, with the S11 ultramax average dropping 7% to $12,593 as of January 21. The primary factor for this downturn has been a sharp decrease in rates for voyages originating from China. For instance, the trip to West Africa has seen a 16% drop, now averaging $9,500 per day, while coal shipments from Indonesia to India have fallen by 12% to $10,064 per day. The China-Indonesia coal run has also suffered, with rates down 15% to $7,706 per day, although this is an improvement from last year’s lows of $4,500 per day.
Handysize bulker freight rates have also plummeted, marking one of the worst months in recent years. The H7 average has decreased by 13% to $10,698. The Atlantic region has been particularly hard-hit, with a growing tonnage list causing backhaul rates to South America to drop by 26% to $6,871 per day. Rates for fronthaul shipments from Brazil to Europe and the U.S. Gulf have also declined, reflecting broader market trends. Meanwhile, in the North Pacific, rates fell by 5% to $9,800 per day, and the South Pacific round voyage decreased by 6% to $9,994 per day, indicating a challenging environment for shipping operators as they navigate these turbulent waters.
