SPOT rates for bulk commodity ships remain under pressure across the board. Incremental tonne-mile upside from the Russia/Ukraine war and Red Sea crisis is already baked into the numbers, so it’s back to old-fashioned supply and demand — and demand is lagging, with bulk commodity prices headed downward.

The price of Brent crude fell 6% to less than $72 per barrel due to Israel’s strike against military — not energy — targets over the weekend. “Leaving oil infrastructure alone does nothing to impact oil markets… and removed a potential tanker catalyst,” said Stifel analyst Ben Nolan.

According to Jefferies analyst Omar Nokta: “A relatively contained Israeli military response against Iran over the weekend appears to be steadying concerns of a widening Middle East conflict, which is pressuring oil prices and weighing on tanker sentiment.”

Crude and product tanker rates are still profitable, but they’re below expectations. There are also rising concerns on petroleum demand growth in 2025, as well concerns over newbuilding deliveries on the product-tanker front.

“From a spot-rates perspective, the seasonal soft patch caused downwards 3Q estimate revisions and a slower ramp-up to higher rates creates risk to 4Q figures,” said Nokta.

According to Nolan: “Refinery crack spreads have been low since September, making it harder to find product-tanker arbitrage opportunities. There could certainly still be a seasonal improvement in product tankers, but it is getting to be crunch time and things would need to change soon.”

Clarksons analyst Frode Mørkedal reduced his 2025 tanker spot-rate estimates on Monday by roughly 12%.

Evercore ISI analyst Jonathan Chappell reduced his 2025 tanker spot-rate estimates by an average of 18% on Monday, ranging from a 10% cut for suezmax rates to a 24% reduction for medium range product tankers.

Tanker shares have fallen double digits in October and are now significantly underperforming the broader stock market. Nokta noted that the price-to-net asset value ratio of tanker stocks has fallen to 76% compared to 85% in September and 89% in the first nine months of 2024.

Tanker stocks are only one part of the story. Their October plunge mirrors falls in pricing for dry bulk and gas shipping stocks.

Analysts still see tanker stock upside

Chappell argued that investors are bailing out of tanker stocks too early. Nokta kept his tanker “buy” ratings and said stock weakness is a purchasing opportunity. Mørkedal likewise cited “potential upside for tanker stocks” on Monday.

According to Chappell: “Being greedy for that one last spike has been a recipe for disaster in the past. So, we fully understand the desire to take profits and move on.” However, he maintained that the current upcycle is not over yet.

“Tanker stocks tend to move in direct correlation to spot rates… and spot rates have begun to inflect higher, as they tend to do when the calendar turns to the northern hemisphere winter. Why sell at the bottom of rates or stock prices? Once the very well-advertised 3Q earnings season softness is cleared, the focus will return to spot-rate momentum, a still-limited supply side outlook and attractive free cashflow yields.

“We recognise this view takes a strong stomach and isn’t for everyone. It’s much easier to follow the herd out the door. But we believe that if tanker investors hold on into year-end, they’ll be rewarded,” said Chappell.

Rate pressures are across the board

The broader concern is that demand growth in general — and Chinese demand growth in particular — is slowing to the point where rates are being pressured, not just for tankers but for all bulk commodity shipping segments.

According to data from Clarksons Securities, current spot rates for product tankers, crude tankers, dry bulk carriers, very large gas carriers and liquefied natural gas carriers are all simultaneously at or below their five-year average.

In the case of panamax bulkers, MR product tankers, VLGCs and LNG carriers, current rates are well below that five-year average.

Rates for capesize bulkers are not far below their five-year average but have plummeted 52% month on month (m/m) to $14,800 per day, according to Clarksons. Panamax rates are down 22% m/m to $10,800 per day.

In the product tanker segment, non-eco long range 2 tankers are down 22% m/m to $22,600 per day and LR1s are down 23% m/m to $23,100 per day, with MRs at $16,900 per day.

In gas shipping, VLGC rates are up week on week and m/m, but at $36,800 per day, they are still nowhere close to where they should be at this time of year. The five-year average is around $60,000 per day.

LNG shipping is by far the worst performer, with spot rates for tri-fuel diesel engine carriers at just $20,300 per day and rates for two-stroke carriers at $35,000 per day, down 56% and 42% m/m, respectively. The five-year average for these vessels at this time of year is vastly higher, at around $200,000 per day.

LNG shipping is suffering from too many newbuildings delivered prior to the start-up of related liquefaction projects, as well as an absence of the typical pre-winter floating storage business.

According to Mørkedal: “LNG carrier rates continue to defy normal seasonality. Despite relatively healthy levels of activity, the markets west of Suez remain at record lows and brokers expect further pressure on rates due to the continued oversupply of vessels and limited arbitrage opportunities. The market in the east also remains under pressure, with minimal activities last week and recent fixtures in the west affecting sentiment.

“In the multi-month market, brokers highlight that interest for fixed-rate contracts is shrinking, with charterers preferring index-linked structures,” added Mørkedal.

Demand outlook uninspiring, upside catalysts limited

Lacklustre demand for bulk commodity shipping is coinciding with weaker pricing for the commodities that fill the cargo holds.

Brent crude is down 7% year to date. Benchmark prices are down 40% year to date for iron ore and 13% for steel rebar, according to Trading Economics. Benchmark prices are down 24% year to date for soyabeans, 5% for corn and 4% for wheat, according to data from Macrotrends.

The economic outlook is not bad — there are no significant fears of a looming global recession — but the outlook is not strong either, which limits upside catalysts for bulk commodity shipping.

The International Monetary Fund (IMF) said in its new outlook, released on October 22, that the situation was “stable but underwhelming”, with the risks weighted to the downside due to “elevated policy uncertainty”.

The IMF now projects that global economic growth will hold steady at 3.2% in both 2025 and 2026, versus 3.3% this year. The concern for bulk commodity shipping, which is disproportionately reliant on China, is that the IMF expects Chinese growth to be 4.8% next year and 4.5% in 2026, compared to 5.2% this year.

Given that no growth surge is expected, shipping rate upside is more dependent on new “wildcard” catalysts.

Containerised freight has two such possibilities in the near term: a potential US presidential win by tariff lover Donald Trump, which would spur a massive pull-forward in US imports; and a possible resumption of the dockworker strike at US east and Gulf coast ports starting on January 15, which would tie up containerships and box equipment.

Possible catalysts for bulk commodity shipping are more speculative and less immediate. Some of them sound like people grasping for straws.

One possibility — which is now less likely, given Israeli’s military-focused strikes in Iran — is a regionwide war in the Middle East that causes a short-term surge in energy shipping rates.

According to another theory, a Trump victory could eventually lead to more restrictions on Iranian crude exports and more business for mainstream very large crude carriers loading Saudi Arabian oil.

Yet another upside theory is that Saudi Arabia might tire of giving up market share and start exporting a lot more oil as Atlantic Basin supplies simultaneously grow, leading to contango and floating storage.

For dry bulk, one upside scenario is that China reverts to the kind of construction-centric stimulus it has favoured in the past, although this is now considered much more unlikely, given China’s severe debt woes and the non-construction-focused strategy of its most recent stimulus.

Another dry bulk upside possibility — albeit very hypothetical — was cited by Star Bulk president Hamish Norton at this month’s Capital Link New York Maritime Forum. He speculated that in the case of a political dispute between China and Australia, China could replace Australian dry bulk cargoes with more tonne-mile-intensive Brazilian and Guinean volumes.

“That’s a tough bet,” countered SwissMarine founder Peter Weernink, who sounded extremely sceptical.