Navigating 2025: Freight Market Trends, Tariff Turbulence, and Green Horizons

Freight up.

Hello and welcome back to Freight up, the Freight and Commodity podcast of Freight Investor Services.

I'm Jess and together with Davide, we will be your host as we navigate our major freight and bulk commodity markets.

It's been a while and we hope you've had a nice holiday and you're ready to start the year with us.

Yeah hello everyone.

So a lot, as you can imagine has happened since you last heard from us today.

We will begin with Our old friend Ben Klango is actually back and will tell us more about the latest developments in the macro and freight markets.

And then we're gonna hear more about fuel oil from Archie Smith, but in the same way we used to start our episodes in 2024, let's first look at the latest news and index movements of the last two weeks.

In the United States, the headlines were dominated by the inauguration of Donald Trump's second presidential term.

On the economic front, the labor market delivered a strong performance in December, adding 256,000 jobs, the highest in nine months.

This follows a downwardly revised 212,000 jobs in November and far exceeds market expectations of the 160,000.

October's figures were also revised downwards, resulting in a combined adjustment of 8,000 fewer jobs for October and November.

Meanwhile, the unemployment rate fell to 4.1% in December, down from 4.2% in November, beating market projections.

On the inflation front, the annual core consumer price inflation rate, which excludes volatile items like food and energy, eased slightly to 3.2% in December compared to 3.3% over the previous three months.

This was marginally below expectations.

Overall annual inflation, however, rose for the third consecutive month, reaching 2.9% in December from 2.7% in November.

Aligned with the market forecast Shifting to.

China, the annual inflation rate edged down to 0.1% in in December from 0.2% in November, meeting market expectations.

This marks the lowest inflation level since March, highlighting the ongoing deflationary pressures.

Despite government stimulus and central bank support, China's economy showed signs of acceleration, expanding by 5.4% year on year in the fourth quarter of 2024, up from 4.6% in Q3 and surpassing market estimates of 5.0.

This represents the fastest growth in 18 months, fueled by a series of stimulus measures included since September to bolster the recovery and restore confidence.

Additionally, China recorded a record trade surplus of $104.84 billion in December, sharp increase from the 75.31 billion in the same period last year and exceeding the expected $99.80 billion.

The surge was driven by robust export growth, with sales jumping 10% year on year, well above the forecast of 7.3% and up from a 6.7% rise in November.

What about the market movements of the last two weeks?

Let's take a quick look.

The C5TC index has experienced a rollercoaster ride recently.

It kicked off on Tuesday 7 January at 102,000, climbed to a peak of $13,300 by the 14th, and then slid back to $10,647 as of yesterday 21 January.

Turning to Panamaxis, the P5TC Index has seen a significant decline, dropping from $9,547 two weeks ago to $7,862 as of yesterday.

Supramaxis have followed a similar downward Trend with the S10TC index falling from $8,780 on the 7th of January to $6,008 $848 yesterday.

Handy sized haven't been spared either.

The HS70C index lost substantial ground, dropping from $9,581 on the 7th to the $7,854 as of yesterday.

I'm now joined by Ben Klang in our first episode of 2025, and today we'll be discussing the key factors shaping the dry bulk market this year.

So we're kicking off 2025 after an unseasonably low Q4 in 2024, where dry bulk was propped up by the stockpiling in China and trade disruptions caused by the conflicts in the Middle east and Russia that marked a broader weakness in the global commodity consumption.

So, Ben, in your first episode back, we give you no small task, but could you please explain a little bit about that?

And let's start with the outlook for vessel supply in the coming year.

Yeah.

Hi Jess.

Thank you.

It's great to be back.

We're expecting an increase in supply, as you kind of mentioned, with 36 to 38 million deadwood tons of new vessels scheduled to hit the water this year.

Well, depending on the source.

Okay, and do we anticipate there's enough demand from China to absorb that additional capacity?

Well, not likely.

The market remains sluggish.

Chinese economy is still searching for momentum, and with the Chinese New Year next week, we will see the usual seasonal slowdown, but also long term.

China's coal and iron ore stockpiles are near record levels.

We still see weak consumption dynamics globally.

That would suggest a limited cargo volume growth for China.

2025.

Okay, and the other Major red flag is coming from the US So could you give us a little bit of an overview about that situation?

Yes.

Not crystal clear yet, but with Trump's inauguration and flood of executive orders, there's plenty to unpack.

The most concerning development of his proposed tariff plan, which could include global duties as high as 20% and potentially a 60% tariff on all Chinese imports.

And if these are implemented, these measures could significantly slow globalization and drive down freight rates.

Additionally, the speculations about Trump's interest in purchasing the Panama Canal and all through Panama has firmly rejected the idea.

So is there anything else on that supply demand front that we should be looking out for?

Yes.

The Houthi Group announced that they will halt the Red Sea attacks if the Ghost are true holds.

If this happens, ship will no longer need to reroute around the Cape of Good Hope and War premiums could decline.

Saying that though while this could put pressure on already low freight rates, the impact may be more visible on spot pricing since you know, it's already likely to be priced in in the futures.

And then the other big thing in shipping this year is there is that new greenhouse gas regulations.

Yeah, it's actually starting from the January 1st.

And these new EU regulations set strict limits on greenhouse gas emissions for ships above 5,000 Ross tons calling at all EU ports.

And these greenhouse gas emissions cover the usual suspects, CO2, methane and nitrous.

Oxide.

Emissions compliance can involve a mix of technologies like scrubbers, alternative fuels or operational adjustments.

Okay, thanks Ben.

That's a lot to digest.

On the physical side, could you also give us a quick summary of the past week in the FFA market?

Well the Cape size market seemed to have stabilized around $10,000 per day for prompt contracts.

Last week January actually traded as high as $11,625 before dropping back to 106 50.

Q1 also fell from 11,300 last Monday to 10,675 by yesterday.

Further along the curve, Q2 dropped approximately thousand bucks over the week to 16,000 5 50.

And then if we go to the Panamaxis, it's been a tough week.

The rates are hitting lows that we haven't seen in months.

For example January contract fell to 6975 on the 13th and has hovered around that support level.

Q1 has followed suit dropping from 7800 to 7400 over the week.

And you know, finally the Supramax has started to mirror the Panamaxis with most contract also hitting lowest that we haven't seen in Months with the January contract dropped around $400 to $7,600.

Thanks, Ben.

It's good to have you back.

We've also had our freight guys trade the first C5 option this week.

So that's a good way to go into 2025.

Continuing to see new markets.

Absolutely, yes.

Thanks for having me back and yes, exactly.

Continuing our innovative journey with C5.

Thank you, Ben.

And now let's talk about fuel oil with Archie's Meat.

Archie, thank you very much for joining us again.

How are you doing to be back?

It's good to be back.

I'm very well.

How are you?

Not too bad.

So first episode of 2025.

Yes.

We couldn't do it without you.

So I missed the last episode of 2024.

Oh yeah, that was a shame.

Well, now we have the time to actually ask you a few questions about how this year is going.

So 2025 has started with like some fresh volatility both in the crude and the products market in general.

So what do you think that have been the main drivers so far this year?

It's definitely a lot of the movement, the majority of the movement has been linked to US Political space.

So initially, you know, earlier on in the month, kind of start of Jan, you saw a kind of last ditch few decisions from the Biden administration with the most recent set of sanctions and restrictions on Russia and Iran, particularly targeting their sort of oil business that saw us spike in the crude, that saw the front month future head to over $82 per barrel which is the highest levels that we've had since summertime.

So it's nice to see a bit of injection there.

And then it sort of flipped on its head a little bit as Trump has come in.

Obviously we had his inauguration, the sire this week and in the build up to that, we've actually seen prices slip a little bit back below the $80 per barrel mark.

That's because of a few things Trump said.

I know he declared energy crisis in the US and basically said the US Is going to drill, drill, drill and that US Output is pretty much expected to rise massively with regards to crude and products.

So that's added downward pressure to prices.

And another thing that Trump came out with that we saw have a direct influence on prices was the fact that even though he's kind of sticking to his guns on the tariffs, particularly on China, Mexico, Canada, he's not going to implement them right away.

So it was given the markets a little bit of grace period, again softening prices.

And then in the background of all of that.

You've actually had sort of, well, the Gaza ceasefire.

Right.

There's been hostages handed back from both sides.

That's lifted a lot of the tension, obviously, in the Middle East.

And so that's another downward pressure on prices.

But, you know, they're still holding sort of 79 level.

You know, it's not like Brent's really, really coming off, you know.

So, yeah, it's a kind of tussle between those at the minute.

And I think it'll be interesting to see where we go from there, you know, what Trump does going forward.

Yeah.

You've also mentioned the fact that, like, well, as we know also, like from the previous, like, Trump administration, we also know that, like, one of his main points in the agenda is the reduction of the trade deficit.

So it's also going to be very interesting to see, like, what is going to be his approach towards Europe because he mentioned already that Lucky will like the European Union in general to start buying more gas and also like oil from the US in order to reduce the state 100%.

And I think that's something that's kind of already happening anyway because of circumstances.

Since the Russia, Ukraine war, a lot of the EU relied on Russian power and gas.

And, you know, since the war started in Ukraine, a lot of those people have turned to the US So we've already seen quite a big influx of US Crude coming over to Europe.

And yeah.

And going on what you said, it'd be interesting to see if Trump pushes for even more.

Yeah, it's going to be very interesting from a geopolitical perspective to see, like, how the, let's say, new equilibria, plural, what they will be in the future, all things considered.

Thank you very much for joining us, Archie.

Thank you very much.

And that's it for this episode.

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Freight Up, Freight Up.