Strong fleet growth and persistently low scrapping will bring earnings under pressure from Q4

The dry bulk market continues to enjoy the fair summer weather, despite some softening of vessel benchmarks from late July peaks.

As of mid-August, gearless Baltic benchmarks have retreated, while geared segments remain supported at elevated levels, a change reflected in the Baltic Exchange Dry Index (BDI), which has averaged 2,008 points over the first two weeks of August compared to 2,258 in late July.

After hitting at $31,700/day in late July, Cape rates have found support at around $27,000/day. Market reports indicate that Australian miners are actively securing cargoes for late August, where demand is expected to remain firm in the second half of the year as miners work to make up for export losses incurred during the February dip.

In contrast, most cargo enquiries on the C3 route are focused on September loadings, suggesting forward interest but limited near-term requirements.

Demand for Panamax vessels has unwound slightly from EC South America as soybean trade passes the seasonal peak. However, pockets of support have emerged in the Pacific basin, such as an uptick in coal imports from Japan, South Korea, and Taiwan, driven by increased electricity demand for air conditioning. This trend also supports expectations for stronger coal consumption in the second half of the year, rebounding from a particularly weak first half.

Strong prospects for the upcoming ECSA corn harvest are expected to support grain trade in the coming months, helping to offset some of the weakness from softer soybean trade between the US and China. This should further support demand, particularly in the geared bulker segments.

Broadly speaking, MSI predicts trade volumes in the second half of the year to be stronger than in the first, providing support to dry bulk earnings across vessel segments. However, if the market is still enjoying the summer sun, owners should keep a weather eye on later in the year.

“Scrapping activity remains persistently low, while new deliveries continue at a strong pace, only partially offset by 2.8m dwt in removals,” says MSI Director Will Fray. “This strong pace of deliveries is set to continue into 2026, with an additional 42m dwt scheduled for next year, once again concentrated in the mid-size segments.”

MSI warns that despite firmer demand in H2, the cumulative impact of robust net fleet growth is expected to weigh on the market heading into late Q4 and early Q1 2026, as oversupply pressures build and start to undermine earnings.