2024 Annual Market Review

The freight market is being shaped by an intricate web of geopolitical challenges that create uncertainty and disrupt traditional trading patterns. Key risks stem from the ongoing U.S.-China trade tensions, the protracted Russia-Ukraine war, and escalating instability in the Middle East. The strategic Red Sea, a crucial maritime chokepoint, has seen significant disruptions, influencing vessel employment and trading patterns. These challenges have resulted in higher operating costs, rerouted voyages, and increased insurance premiums, creating ripple effects throughout the shipping industry.

However, the evolution of the dry bulk and tanker freight segments is not solely dictated by geopolitical instability. A critical factor influencing freight performance lies in the persistent oversupply of vessels. This structural imbalance has suppressed freight rates and hindered recovery, despite periods of heightened demand. Compounding this issue is the uneven global demand growth for raw materials and energy commodities, which faces headwinds from volatile commodity prices, shifting export flows, and China's sluggish economic growth. As the world’s second-largest economy, China's performance remains pivotal, with its declining industrial output and reduced import appetite casting long shadows over the freight market.

To complicate matters further, the global shipping fleet urgently requires modernisation to align with ambitious green targets, including carbon-neutral initiatives and compliance with evolving environmental regulations. Yet, the pace of scrapping older tonnage has decelerated significantly over the past two years, exacerbating the oversupply problem. While newbuild orders incorporating greener technologies remain on the horizon, their introduction risks inflating fleet size further unless offset by active scrapping.

Looking ahead, the next five years will be crucial for the shipping industry as it navigates these overlapping challenges. Shipowners will need to adopt strategic measures to address the oversupply of vessels, balance fleet renewal with demand growth, and adapt to the fluid geopolitical environment. Policy shifts, technological innovation, and collaborative industry efforts toward decarbonisation will also play pivotal roles in determining the sector’s trajectory. Ultimately, achieving equilibrium in the freight market will demand a delicate balancing act of scrapping underperforming vessels, incentivizing sustainable practices, and responding nimbly to economic and geopolitical disruptions.

In the following sections, we will analyse the latest trends observed over the past year within the dry bulk and tanker segments, as these developments will play a pivotal role in shaping the evolution of the freight market in the coming year. While global shipping faces many uncertainties, the performance of these two segments will be particularly crucial in determining the overall trajectory of the industry.

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SECTION I: The Challenge from the Growth of the Global Fleet

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Over the past eight years, the growth of the global fleet has been notable, driven by substantial investments in both the dry bulk and tanker segments. However, while the number of vessels has steadily increased, a concerning trend has emerged: the average age of the fleet has gradually risen (see image 1). This is largely due to a significant decline in the scrapping activity of older vessels, which has reached almost negligible levels over the past three years. The sharp reduction in the decommissioning of aging ships has had a dual impact on the market.

First, it has contributed to a strain on the freight market, as the growing fleet size outpaces the demand for shipping, resulting in an oversupply of vessels. This oversupply has put downward pressure on freight rates, creating a less favourable market environment for shipowners. The extended operational life of older vessels, coupled with reduced scrapping, means there is less turnover in the fleet, limiting the introduction of newer, more efficient ships and exacerbating the market imbalance.

Looking ahead to 2025, the outlook for the shipping industry remains uncertain. The lack of scrapping activity has raised concerns about the market's ability to absorb new vessels, which, combined with the ongoing geopolitical challenges, has led to a more cautious forecast. Geopolitical tensions, trade disruptions, and shifting international policies are further complicating the industry's trajectory, adding an element of unpredictability that could hinder growth.

One of the most significant challenges facing the market is the weaker-than-expected growth from China, a major player in global trade and shipping. China's economic slowdown, paired with its targets to reduce dependency on Asian coal and a reduction in crude oil imports, presents additional risks. These factors not only dampen the demand for shipping services but also suggest that the growth in Chinese imports, which has been a major driver of global shipping activity, may not be as robust as previously anticipated.

For the dry bulk segment, the year has seen fluctuating demand driven by key commodities like coal, iron ore, and grain. Despite some weaknesses in global trade and economic slowdowns, dry bulk demand has been supported by robust activities in Asia, particularly from China and India, which continue to drive demand for raw materials. However, the impact of geopolitical tensions, such as the ongoing trade disputes and regional conflicts, has introduced volatility into the market, particularly for key commodities. This trend is expected to continue in the upcoming year, with potential supply chain disruptions and environmental regulations potentially impacting fleet operations and freight rates.

The tanker segment has experienced its own set of challenges, with fluctuations in crude oil demand and production cuts affecting global shipping routes. As oil prices have remained volatile throughout the year, tankers have been under pressure due to reduced global oil consumption and shifting trade flows. Despite these pressures, the segment has also seen some recovery due to the rebounding demand for refined products and an increase in shipments to certain regions. However, the evolving dynamics of energy markets, including the transition to cleaner energy and changing geopolitical relationships, will continue to influence the tanker market in the year ahead.

Amid these market dynamics, one critical and growing concern that continues to threaten the security of global shipping is the Houthi challenge. The ongoing conflict in Yemen and the Houthi militia’s increasing involvement in maritime attacks on commercial vessels, particularly in the Bab el-Mandeb Strait and the Red Sea, has raised alarms over the safety of crucial shipping lanes. The U.S. naval forces have been actively involved in defending commercial vessels from missile attacks, providing essential security to maintain free and secure maritime trade routes. However, incidents of missile and drone attacks on vessels continue to occur, including in the container shipping market, where such attacks can disrupt the flow of goods and create uncertainty in the market.

The threat posed by the Houthis is part of a broader set of security challenges in international waters. Amid a surge in maritime attacks in high-risk regions, shipping companies are facing rising insurance costs, compounded by the increased risk of longer delays and rerouted shipments—factors that add significant complexity to the global freight market. This issue remains critical to monitor, as it has the potential to affect the stability and cost-effectiveness of global shipping, particularly for key trade routes that are vital to the dry bulk and tanker segments.

Looking ahead, the security situation in the Middle East, along with the broader geopolitical landscape, will continue to have a significant impact on the maritime industry. The trends in both the dry bulk and tanker markets, combined with these security challenges, suggest that 2025 may bring a year of caution and strategic adjustments for shipping companies as they navigate both market volatility, escalating regulation and increased risk in critical regions. These evolving dynamics will require careful monitoring and adaptation, as the global freight market adjusts to shifting demand, security risks, and changing geopolitical realities.

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FLEET IN SERVICE & AVERAGE AGE

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As we can observe in Image 1, there has been a steady increase in the number of vessels in the dry bulk (counting vessels larger than 20,000 deadweight) and tanker (larger than 25,000 deadweight) segments, with dry bulk vessels surpassing 12,000 and tankers exceeding 6,000 in total. This growth trend highlights the sustained expansion of the global fleet, even as challenges like oversupply and market volatility persist. At the same time, the average age of the fleet in service has continued to rise, with 2024 closing out with the tanker fleet averaging nearly 15 years of service and the dry bulk fleet exceeding 12 years.

The aging profile of these vessels adds complexity to the market dynamics. Older ships are generally less fuel-efficient and struggle to meet increasingly stringent environmental standards, making them less competitive in an era where regulatory compliance and operational efficiency are paramount. Looking ahead, the trajectory of fleet growth remains uncertain. Scheduled newbuild deliveries over the next few years promise to inject additional tonnage into the market, potentially exacerbating the oversupply unless offset by significant scrapping. Moreover, the focus on greener technologies in newbuild designs may make older vessels even less desirable, potentially accelerating the need for fleet renewal.

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‍FLEET GROWTH (DRY)

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Looking ahead, the dry bulk segment is projected to continue its fleet growth trajectory, driven by a robust delivery schedule and a noticeable decline in scrapping activity compared to the peaks recorded in the year 2020. A breakdown by vessel size reveals nuanced trends that will shape the segment’s future dynamics.

For the smaller vessel categories, such as Supramax and Handysize, there has been progress in removing older vessels from the fleet, contributing to some degree of renewal. However, this has not been sufficient to offset the overall fleet growth anticipated over the next two years, as newbuild deliveries continue to add capacity. In the Panamax category, the outlook reflects a particularly aggressive expansion. The delivery schedule shows over 100 new vessels slated for 2026 and approximately 94 for 2025. This sustained growth in the Panamax segment highlights the segment’s strategic role in mid-size cargo trades but raises concerns about potential overcapacity, which could further pressure freight rates.

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For the Capesize vessels, the picture is more stable. While only a limited number of vessel deliveries are anticipated in the Very Large Ore Carrier (VLOC) category, with the current schedule indicating new additions in 2026, the standard Capesize segment is projected to experience a moderate influx of new deliveries. The standard Capesize segment is forecasted to see a moderate delivery schedule. The annual number of new Capesize vessels is not expected to exceed 40, representing a more controlled expansion compared to the surge observed in 2020, which marked the peak year for Capesize deliveries. One key challenge across the larger vessel segments lies in minimal scrapping activity. Despite the aging profile of many vessels, scrapping levels have remained low, sustaining the fleet at historically high levels for the past three years. This lack of fleet contraction could exacerbate competition among vessels, particularly for employment in critical routes such as the South Atlantic to Asia, where ballasters vie for limited cargo availability to meet Asian demand.

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FLEET GROWTH (TANKER)

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When it comes to the growth of the tanker fleet, it’s evident that there are significant scheduled deliveries ahead, particularly for the next two years. Both the dirty and clean tanker segments are expected to see a steady flow of new vessel deliveries. The projected fleet in service is anticipated to grow steadily through 2026, especially as scrapping activity has dropped to historically low levels over the past two years. In the clean tanker segment, the MR2 vessel class is poised to experience the highest volume of scheduled deliveries, with over 100 vessels expected in the coming two years. On the other hand, the dirty tanker segment is set to see a higher volume of deliveries in the Aframax class, surpassing those of the VLCC and Suezmax segments.

Interestingly, for the coming year, the VLCC segment does not appear to face the same threat of oversupply as the Suezmax and Aframax segments, which will see an influx of new deliveries. However, from 2026 onwards, the VLCC segment is expected to face more competition, with over 30 new vessels scheduled for delivery. In contrast, the Aframax segment is expected to see more than 130 scheduled deliveries over the next two years, highlighting the existing oversupply in that segment.

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SECTION II: Review of Seaborne Trade Evolution - Cargo Count and Voyages to the Far East

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In this section, we will analyse the evolution of seaborne trade, with a particular focus on cargo volumes destined for the Far East. This region, a pivotal hub for global maritime trade, plays a significant role in shaping demand for shipping services. Understanding these trade dynamics is essential for evaluating the balance between cargo availability and vessel deployment, as well as for anticipating market trends.

Fluctuations in voyage volumes to the Far East have a direct and profound impact on freight rates, vessel utilisation, and overall market sentiment. As demand from the Far East reflects a mix of resilience and deceleration, influenced by signs of weak consumption momentum in China—the world’s second-largest economy—amid the looming threat of renewed tariffs from the U.S. under Trump, closely monitoring these patterns will be vital for identifying and adapting to emerging market shifts. Staying attuned to evolving trends will enable stakeholders to navigate the complexities of the freight industry more effectively in the years ahead. 

"The Signal Ocean Platform data presented in this section covers the first two decades of December 2024, as of the release of this piece. Updated trends for the entire month will be provided at the start of the New Year."

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DRY

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In image 4, we observe a steady flow in the volume of cargo count in terms of voyages from all load locations to the Far East. The thermal coal and iron ore fines have consistently led the charge in this trade. Despite this stable flow, the percentage share of Capesize vessels in the total number of voyages has not shown any significant increase. This suggests that the anticipated recovery in the freight market or a firmer market environment has yet to materialize. The lack of growth in Capesize voyages implies that the market conditions for these larger vessels remain challenging, with no clear sign of improvement in the short term.

Moreover, the volume of voyages reveals increasing competition between the Panamax and Supramax vessel size categories, particularly in the coal segment. This rivalry is expected to play a critical role in shaping the market dynamics in the year ahead. Despite the ongoing global push for renewable energy, coal continues to hold a dominant position in the dry bulk freight industry, especially within the Asian sector. The demand for coal is still heavily influenced by the energy needs of these rapidly developing economies, and this demand is likely to remain a significant factor driving the dry bulk market.

As renewable energy initiatives progress in Asia, there could be shifts in energy consumption patterns. However, in the near term, coal is expected to maintain its vital role in powering industries and economies across the region. This persistent demand for coal will likely determine the competitiveness of Panamax and Supramax vessels, with their size flexibility allowing them to better compete in a market where flexibility and speed are crucial for servicing the ever-evolving energy needs of the Far East.

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Focusing on coal trade, image 5, there is a clear shift in cargo volumes, with an increasing flow of coal exports from Indonesian hubs to the Far East. This trend has gained prominence as Russian coal exports have seen a significant decline in monthly volumes. The shift highlights China’s growing dependency on Indonesian coal, which has, in turn, influenced vessel utilization patterns. The Panamax vessel size category has emerged as the primary beneficiary of this trend, with its market share rising sharply to 50%, compared to 30% for Supramax vessels. This marks a notable shift in vessel preference, as it is the first time in three years that Panamax vessels have achieved such a dominant share.

October and November closed with record-high monthly coal cargo volumes, the highest recorded since early 2022, reflecting the intensified demand for Indonesian coal. However, it remains uncertain whether this surge in cargo volumes and the strong performance of Panamax vessels will sustain a similar trajectory into the coming year. 

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‍OIL

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Looking at the volume of dirty and clean oil flows from all loading points to the Far East (image 6), there were certain standout months, such as August and November, that recorded an increase in volume, surpassing the figures observed in prior years. Despite these cases of increases, the overall annual trend remained relatively stable, with volumes fluctuating within a narrow range. This steadiness indicates that the market has yet to demonstrate clear signs of recovery, with the sporadic swings likely driven by external factors rather than a sustained upward momentum.

When examining the percentage shares of various cargo types in the overall oil volume, it becomes clear that there has been no major shift in the market dynamics. Crude oil, for example, continues to sustain a share of just slightly above 20% of the total volume. While this figure is steady, it remains insufficient to create substantial profitable employment opportunities for the crude tanker vessel size categories, particularly in the face of fluctuating demand and competitive pressures within the sector.

The relatively modest share of crude oil in the overall volume suggests that crude tankers are not benefiting from a significant increase in their workload. This underlines the challenge faced by operators in the crude tanker market, as they continue to compete for limited cargoes. The steady, yet unspectacular, volume of crude oil flows also highlights the struggle for profitability, as vessel owners are faced with tight margins and inconsistent demand.

Moreover, the clean oil segment—responsible for products like refined fuels—has similarly maintained stable volumes without significant growth. While clean tankers may not be facing the same degree of competition or supply-demand imbalances as crude tankers, the overall market conditions in the Far East suggest that there are limited opportunities for vessel categories to achieve a sustained increase in rates or utilisation in the short term.

The market's reliance on steady but unspectacular cargo volumes, combined with the stable share of crude oil, indicates that unless there is a major shift in global oil production, regional demand, or geopolitical factors, the tanker market—both for clean and dirty vessels—may face a period of cautious stability rather than growth. This will require operators to adapt and optimise their fleets to make the most of the available opportunities, rather than relying on a significant surge in demand to drive profitability.

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Focus on Dirty Tanker Market Dynamics: AG vs. Russian Dynamism

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The dirty tanker market has been increasingly shaped by the evolving dynamics between the Arabian Gulf (AG) and Russia, two key players in global crude oil exports. This interplay highlights contrasting trends and competitive shifts that are redefining trade routes, freight rates, and vessel utilisation.

Russia’s crude oil trade has undergone a seismic shift due to geopolitical tensions and sanctions following the Russia-Ukraine conflict. This has led to a redirection of crude flows, with Russia increasing its exports particularly in Asia, to compensate for lost European demand. Russia’s crude exports are now favouring destination countries of China, Korea, and India which rely heavily on mid-size vessels like Aframax more than Suezmax tankers. This shift has adjusted employment patterns for dirty tankers, where ton miles and days growth from the Russian Pacific to U.K Continent has reduced, as there was an increase in the growth towards China especially in the previous two years. Discounted Russian crude created an attractive pricing dynamic for buyers in Asia. However, the increased demand for non-sanctioned tankers and insurance-compliant operations has driven up freight rates for Russian-origin cargoes, adding complexity to the market, with a decreasing trend seen in the last year in the growth of China’s oil demand. 

Looking at the volume of crude oil voyages from the Russian Pacific to Far Eastern destinations, image 7, 2024 has seen a notable increase compared to the previous year. Significant spikes in volumes were observed at the end of the first quarter, as well as during October and November, reflecting both seasonal demand fluctuations and broader geopolitical factors. The trade volume from the Russian Pacific to North China has been particularly striking, with the region now accounting for nearly 70% of the crude oil exports from this area. This shift in trade patterns has placed increased emphasis on specific vessel categories, especially the Aframax segment.

The Aframax vessels, which are often considered more versatile and flexible than larger ship sizes like VLCCs, have played a dominant role in meeting the demand for Russian crude oil exports to the Far East. Throughout 2024, Aframax vessels have steadily gained employment, benefiting from this upward trend in voyage flows from the Russian Pacific to the Far East. These vessels have become increasingly sought after due to their ability to navigate the narrower, more congested shipping lanes around the region, making them particularly well-suited to this growing trade.

This trend of increasing Aframax employment is expected to continue in the coming year as the Russian crude oil market strengthens its trading ties with the Far East. Russia’s focus on diversifying its export routes and deepening its relationship with Asian markets, particularly China, is expected to fuel further demand for tanker services. At this point, it is noteworthy that, in addition to China’s prominent role in Russian crude oil purchases, India is emerging as a key new partner for Russian oil. During the second and third quarters of the past year, significant volumes of Russian crude were directed to India’s East Coast, highlighting the growing demand. It appears that India's oil demand for Russian crude may play an increasingly dynamic role, potentially offsetting the slower growth in oil demand from China.

A recent development underscores this shift: Rosneft, Russia’s state-owned oil giant, has reached a landmark agreement to supply nearly 500,000 barrels per day (bpd) of crude oil to Reliance Industries (RIL). This deal, the largest energy agreement ever between the two nations, is valued at around $13 billion annually at current prices, representing 0.5% of global oil supply. This 10-year agreement is expected to significantly strengthen energy ties between India and Russia, positioning India as a critical player in the evolving dynamics of Russian crude exports.  As a result, the Aframax vessel segment is likely to remain in high demand, with freight rates potentially influenced by the interplay between increased Russian exports and the competition for vessel availability.

Moreover, the growing dominance of Russian crude oil exports to the Far East also has implications for the broader dirty tanker market. The increasing reliance on Aframax vessels may limit the potential growth for larger tanker categories, such as VLCCs, which are less suited for the specific needs of these trade routes. The strength of this Russian-Pacific-to-Far-East trade flow will continue to shape the global tanker market, as oil-exporting nations and trading partners adjust their strategies to meet both changing energy demands and the evolving geopolitical landscape.

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SECTION III: SHIP PRICES 

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At this section of the analysis, it is important to emphasise an intriguing market dynamic: despite the absence of significant spikes in the volumes of voyages and cargo flows across both the dry and tanker vessel segments—indicators that typically suggest a rise in demand, tonne-day growth, and a firmer outlook for the freight market—ship prices have remained remarkably resilient. In fact, when compared to the levels observed in 2022, current ship prices show a firmer upward trend. In Image 8, we observe the evolution of secondhand values for key vessel types, offering valuable insights into the dynamics of asset pricing across the dry bulk and tanker segments. For Example A, a Capesize bulk carrier built in 2020 in Japan, the market value has climbed significantly, reaching approximately $64 million, which represents a $7 million increase compared to its valuation at the start of 2022. In the tanker segment, Example B, the secondhand value of a 2020-built VLCC (Very Large Crude Carrier) in Japan has seen an even steeper appreciation. Its market value has risen to over $110 million, a substantial increase from the sub-$90 million levels observed at the beginning of 2020.

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This resilience in ship asset prices appears to be driven largely by heightened geopolitical risks, which have created an environment of increased uncertainty and, consequently, an inflated value profile for vessels in both the dry and tanker segments. These geopolitical factors—ranging from sanctions on Russian oil exports to shifts in energy trade patterns—have amplified the perceived strategic importance of fleet ownership, encouraging buyers to secure tonnage even in the face of fluctuating market conditions.

The rise in ship prices is evident not only in the secondhand market but also in the newbuilding sector. Interest in ordering new vessels has surged, spurred by expectations of long-term trade shifts and regulatory pressures, such as the transition toward greener shipping technologies. This heightened demand for newbuildings has, in turn, placed upward pressure on secondhand vessel values, as shipowners look for more immediate opportunities to capitalise on market changes without waiting for newbuilds to be delivered.

Another contributing factor to this trend is the technology risk associated with newbuilds in combination with a lack of incentives for scrapping older vessels. Demolition prices have remained unattractive, failing to prompt shipowners to engage in aggressive scrapping programs. Instead, many shipowners are choosing to retain aging tonnage, especially given the current cost of acquiring new or secondhand ships. 

The interplay between geopolitical uncertainties, market optimism for future growth, and limited scrapping activity paints a complex picture. While the freight market itself has not shown sustained improvement in demand metrics like tonne-day growth, the firming of asset values reflects a longer-term confidence in the sector's recovery. This confidence is underpinned by expectations of regulatory shifts, such as the global push for energy transitions and carbon reduction, which are likely to drive demand for modern, fuel-efficient vessels in the coming years.

Looking ahead, it will be interesting to observe whether this firmness in ship prices continues, especially if freight rates fail to recover significantly. Shipowners may eventually face tighter margins as operating costs rise, further complicating the decision to invest in new tonnage or maintain older fleets. Additionally, any shifts in geopolitical factors or macroeconomic conditions could either reinforce or undermine this current trend, shaping the outlook for both newbuilding and secondhand ship markets.

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The above analysis leveraged the advanced freight analytics of The Signal Ocean Platform, offering a comprehensive summary of annual trends across key market indicators, including Fleet, Demand, Ship Prices, and Voyages. As we step into the New Year, we invite you to explore these trends further through our weekly monitors, which provide in-depth analyses of Freight, Supply, and Demand metrics. Stay tuned for more enhancements to our platform, including new features that will deepen your understanding of market behaviour and improve operational planning.