Shipping Market Outlook: Q1 2025 Forecast

Overview

The Houthi attacks in the Bab Al Mandeb strait and the subsequent re-routing around the capes has supported all the different shipping markets segments to varying degrees. The highly unpredictable nature of the Houthis creates a lot of uncertainty, as a sudden cessation of attacks carries a lot of downside risk for shipping, while a long-term extension of the attacks carries significant upside risks.

Ongoing geopolitical conflicts, accompanied by related sanctions, contribute to an uncertain environment. Any significant escalation or de-escalation in these conflicts could significantly impact the overall economic outlook. The Trump administration has threatened to impose significant tariffs and other protectionist measures, raising concerns about potential trade wars, reduced international trade, and persistently higher inflation. A high level of uncertainty remains regarding how these measures will be implemented and the extent to which they will be carried out.

Meanwhile, the recovery of China’s economy remains fragile, introducing additional uncertainty due to its critical role as a global demand driver. This precarious situation could be exacerbated by potential trade wars, as China’s economy is heavily reliant on exports. 

Here’s a summary of how this uncertainty could play out across tankers, bulkers, containers, and gas industries based on our forecast data. 

Tankers

We maintain that while Russian exports of both crude oil and products may decline, sourcing supplies to Europe from other suppliers such as MEG, US, Latin America, will continue to support ton-mile demand and support rates going forward.

Uncertainties as to how much sanctioned production and exports from Russia, Iran, and Venezuela will be impacted will remain important for seaborne oil flows in the foreseeable future.

Tanker ordering activity has picked up in 2024 and in DWT terms has already surpassed 2023’s total by 33% and will likely reach 50 mil DWT this year compared to last years’ 36 mil DWT.

Having seen very strong growth over the past three years, ton-mile demand is set to normalise in 2025 and beyond in our current base case for both crude and product Tankers.

China’s recovery in oil demand and import needs will be crucial for renewing the strength of the Tanker market in the year ahead.

Bulkers

With moderate growth anticipated in both supply and demand, we expect the market to remain balanced throughout our forecast period, fostering a healthy freight rate environment.

China’s imports of iron ore, bauxite, and coal have been robust this year, but sluggish domestic demand suggests that much of these resources have been stockpiled, leading to increased inventories.

The emergence of Guinean iron ore, the continued growth of the ton-mile-intensive Brazil-China iron ore trade, and the Guinea-China bauxite trade supports a favourable outlook for ton-mile demand growth in the coming years.

The green transition and the growing need to address climate change is expected to drive Bulker demand growth in the coming years. Various initiatives will increase the need for steel products, cement, and range of minor bulk commodities, including bauxite, copper, and nickel.

Transits through the Panama Canal have largely normalised this year, thanks to an increase in water levels. However, rerouting continues to be a significant issue for international shipping, as Houthi attacks in the Bab al-Mandeb Strait show no signs of abating.

Containers

The growth has continued at a high pace so far this year due to more volumes traded and additional sailing distances.  TEU-mile demand for 2024 is forecasted to be 16.7%. Our current analysis points to total TEU-mile growth of 3.2% yearly average over the period 2024-2028.

We forecast freight rates to decline steadily in 2025 as more vessels enter the market. We further expect freight rates to decline in 2026 and 2027 before seeing some increase in 2028. We have seen box rates decline in 2H 2024 and expect freight rates to follow to some degree. Idle capacity has started to increase, and this is likely to continue in our forecast period.

Vessel supply growth in our forecast period will at some point outpace demand despite the Red Sea conflict, and this will affect freight rates for all sizes.

With the strong freight rates the Container market has seen so far this year, ordering activity has been at a record high with almost 4 mil TEU’s being ordered. With over 8 mil TEU’s entering the market over the next couple of years, we expect a surplus supply despite the ongoing rerouting.

With the EU ETS being live and a general tightening of CO2 emissions regulations, we anticipate that operating elderly non-eco vessels will become increasingly costly. This is especially pertinent given the forecasted decline in rates. From 2025 and onwards, we expect many of these older vessels to find their way to the scrapyard. 

Gas

With a strong export growth forecast in 2024 and no terminal expansion until 3Q25, we expect US export growth to only be 3.9% in 2025 before seeing an average growth of 7.6% between 2026-2028.

The net fleet growth for VLGCs/VLACs has been 11% in 2024. Given the strong ordering activity observed in recent years, we expect this supply growth to exert downward pressure on earnings toward the end of our forecast period.

Earnings for VLGCs are expected to average around 43,000 USD/Day in 2024 before declining somewhat to c.41,000 USD/Day in 2025, based on limited export growth opportunities in the US. We expect earnings to gain momentum on the announced terminal expansions in 2026, before seeing earnings decline in 2027 and 2028 due to significant supply growth.

In 2025, we expect normal activity in the Panama Canal, and this will reduce the sailing distance compared to what we have seen in 2024.

LPG demand in the Asia-Pacific region continues to grow this year, with import volumes rising approximately 12% in the first three quarters. Imports to China from the US have surged by an astonishing 36%, contributing positively to global CBM-mile demand. China is expected to proceed with its PDH expansion plans in 2025, which will further support LPG demand growth in the country. India has also experienced significant growth, with imports increasing by 29%, accounting for 27% of the global import demand for butane.

Seaborne ammonia trade has declined, registering a 1.3% decrease in the first three quarters compared to the same period last year. While we anticipate global ammonia trade to grow over our forecast period due to ongoing blue and green ammonia projects worldwide, delays in some of these projects suggest that significant growth is unlikely next year.

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