Hello, Jess here from Freight Up! Welcome to our latest episode, "Navigating 2025 - Freight Market Trends, Tariff Turbulence, and Green Horizons."
In this episode, we take a serious deep dive into the current dynamics reshaping the freight and bulk commodity markets as we enter 2025.
You'll hear our discussions on the latest economic data from the US and China, key trends in the dry bulk market, and the impact of new greenhouse gas regulations.
If you're looking to stay ahead of the curve in an ever-evolving market, this episode is packed with insights you'll want to hear.
We kick things off with a detailed look at recent economic developments.
In our discussion with Ben Klang, we tackle the supply-demand dynamics in the dry bulk market. Ben gives us a grim outlook: a sluggish Chinese economy, Trump's proposed tariffs, and the geopolitical landscape all suggest impact.
00:00 China's Growth, Inflation, and Trade Updates
04:06 2025 Dry Bulk Market Outlook
07:45 Capesize Stabilises, Panamax Falls
09:56 US Politics Drive Oil Price Fluctuations
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Freight up.
Speaker BHello and welcome back to Freight up, the Freight and Commodity podcast of Freight Investor Services.
Speaker BI'm Jess and together with Davide, we will be your host as we navigate our major freight and bulk commodity markets.
Speaker BIt's been a while and we hope you've had a nice holiday and you're ready to start the year with us.
Speaker CYeah hello everyone.
Speaker CSo a lot, as you can imagine has happened since you last heard from us today.
Speaker CWe 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.
Speaker CAnd 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.
Speaker BIn the United States, the headlines were dominated by the inauguration of Donald Trump's second presidential term.
Speaker BOn the economic front, the labor market delivered a strong performance in December, adding 256,000 jobs, the highest in nine months.
Speaker BThis follows a downwardly revised 212,000 jobs in November and far exceeds market expectations of the 160,000.
Speaker BOctober's figures were also revised downwards, resulting in a combined adjustment of 8,000 fewer jobs for October and November.
Speaker BMeanwhile, the unemployment rate fell to 4.1% in December, down from 4.2% in November, beating market projections.
Speaker BOn 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.
Speaker BThis was marginally below expectations.
Speaker BOverall annual inflation, however, rose for the third consecutive month, reaching 2.9% in December from 2.7% in November.
Speaker BAligned with the market forecast Shifting to.
Speaker CChina, the annual inflation rate edged down to 0.1% in in December from 0.2% in November, meeting market expectations.
Speaker CThis marks the lowest inflation level since March, highlighting the ongoing deflationary pressures.
Speaker CDespite 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.
Speaker CThis represents the fastest growth in 18 months, fueled by a series of stimulus measures included since September to bolster the recovery and restore confidence.
Speaker CAdditionally, 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.
Speaker CThe 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.
Speaker CWhat about the market movements of the last two weeks?
Speaker CLet's take a quick look.
Speaker CThe C5TC index has experienced a rollercoaster ride recently.
Speaker CIt 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.
Speaker CTurning to Panamaxis, the P5TC Index has seen a significant decline, dropping from $9,547 two weeks ago to $7,862 as of yesterday.
Speaker CSupramaxis have followed a similar downward Trend with the S10TC index falling from $8,780 on the 7th of January to $6,008 $848 yesterday.
Speaker CHandy sized haven't been spared either.
Speaker CThe HS70C index lost substantial ground, dropping from $9,581 on the 7th to the $7,854 as of yesterday.
Speaker BI'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.
Speaker BSo 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.
Speaker BSo, Ben, in your first episode back, we give you no small task, but could you please explain a little bit about that?
Speaker BAnd let's start with the outlook for vessel supply in the coming year.
Ben KlangYeah.
Ben KlangHi Jess.
Ben KlangThank you.
Ben KlangIt's great to be back.
Ben KlangWe'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.
Ben KlangWell, depending on the source.
Speaker BOkay, and do we anticipate there's enough demand from China to absorb that additional capacity?
Ben KlangWell, not likely.
Ben KlangThe market remains sluggish.
Ben KlangChinese 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.
Ben KlangChina's coal and iron ore stockpiles are near record levels.
Ben KlangWe still see weak consumption dynamics globally.
Ben KlangThat would suggest a limited cargo volume growth for China.
Ben Klang2025.
Speaker BOkay, 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?
Ben KlangYes.
Ben KlangNot crystal clear yet, but with Trump's inauguration and flood of executive orders, there's plenty to unpack.
Ben KlangThe 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.
Ben KlangAnd if these are implemented, these measures could significantly slow globalization and drive down freight rates.
Ben KlangAdditionally, the speculations about Trump's interest in purchasing the Panama Canal and all through Panama has firmly rejected the idea.
Speaker BSo is there anything else on that supply demand front that we should be looking out for?
Ben KlangYes.
Ben KlangThe Houthi Group announced that they will halt the Red Sea attacks if the Ghost are true holds.
Ben KlangIf this happens, ship will no longer need to reroute around the Cape of Good Hope and War premiums could decline.
Ben KlangSaying 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.
Speaker BAnd then the other big thing in shipping this year is there is that new greenhouse gas regulations.
Ben KlangYeah, it's actually starting from the January 1st.
Ben KlangAnd these new EU regulations set strict limits on greenhouse gas emissions for ships above 5,000 Ross tons calling at all EU ports.
Ben KlangAnd these greenhouse gas emissions cover the usual suspects, CO2, methane and nitrous.
Ben KlangOxide.
Ben KlangEmissions compliance can involve a mix of technologies like scrubbers, alternative fuels or operational adjustments.
Speaker BOkay, thanks Ben.
Speaker BThat's a lot to digest.
Speaker BOn the physical side, could you also give us a quick summary of the past week in the FFA market?
Ben KlangWell the Cape size market seemed to have stabilized around $10,000 per day for prompt contracts.
Ben KlangLast week January actually traded as high as $11,625 before dropping back to 106 50.
Ben KlangQ1 also fell from 11,300 last Monday to 10,675 by yesterday.
Ben KlangFurther along the curve, Q2 dropped approximately thousand bucks over the week to 16,000 5 50.
Ben KlangAnd then if we go to the Panamaxis, it's been a tough week.
Ben KlangThe rates are hitting lows that we haven't seen in months.
Ben KlangFor example January contract fell to 6975 on the 13th and has hovered around that support level.
Ben KlangQ1 has followed suit dropping from 7800 to 7400 over the week.
Ben KlangAnd 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.
Speaker BThanks, Ben.
Speaker BIt's good to have you back.
Speaker BWe've also had our freight guys trade the first C5 option this week.
Speaker BSo that's a good way to go into 2025.
Speaker BContinuing to see new markets.
Ben KlangAbsolutely, yes.
Ben KlangThanks for having me back and yes, exactly.
Ben KlangContinuing our innovative journey with C5.
Speaker BThank you, Ben.
Speaker CAnd now let's talk about fuel oil with Archie's Meat.
Speaker CArchie, thank you very much for joining us again.
Speaker CHow are you doing to be back?
Speaker AIt's good to be back.
Speaker AI'm very well.
Speaker AHow are you?
Speaker CNot too bad.
Speaker CSo first episode of 2025.
Speaker AYes.
Speaker CWe couldn't do it without you.
Speaker ASo I missed the last episode of 2024.
Speaker AOh yeah, that was a shame.
Speaker CWell, now we have the time to actually ask you a few questions about how this year is going.
Speaker CSo 2025 has started with like some fresh volatility both in the crude and the products market in general.
Speaker CSo what do you think that have been the main drivers so far this year?
Speaker AIt's definitely a lot of the movement, the majority of the movement has been linked to US Political space.
Speaker ASo 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.
Speaker ASo it's nice to see a bit of injection there.
Speaker AAnd then it sort of flipped on its head a little bit as Trump has come in.
Speaker AObviously 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.
Speaker AThat's because of a few things Trump said.
Speaker AI 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.
Speaker ASo that's added downward pressure to prices.
Speaker AAnd 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.
Speaker ASo it was given the markets a little bit of grace period, again softening prices.
Speaker AAnd then in the background of all of that.
Speaker AYou've actually had sort of, well, the Gaza ceasefire.
Speaker ARight.
Speaker AThere's been hostages handed back from both sides.
Speaker AThat's lifted a lot of the tension, obviously, in the Middle East.
Speaker AAnd so that's another downward pressure on prices.
Speaker ABut, you know, they're still holding sort of 79 level.
Speaker AYou know, it's not like Brent's really, really coming off, you know.
Speaker ASo, yeah, it's a kind of tussle between those at the minute.
Speaker AAnd I think it'll be interesting to see where we go from there, you know, what Trump does going forward.
Ben KlangYeah.
Speaker CYou'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.
Speaker CSo 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%.
Speaker AAnd I think that's something that's kind of already happening anyway because of circumstances.
Speaker ASince the Russia, Ukraine war, a lot of the EU relied on Russian power and gas.
Speaker AAnd, 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.
Speaker AAnd yeah.
Speaker AAnd going on what you said, it'd be interesting to see if Trump pushes for even more.
Speaker CYeah, 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.
Speaker CThank you very much for joining us, Archie.
Speaker AThank you very much.
Speaker BAnd that's it for this episode.
Speaker BMake sure to subscribe by clicking the subscribe button on wherever you get your podcast.
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Speaker BThanks again for joining us.
Speaker BAnd we'll be back in two weeks with freight and commodity podcast.
Speaker BFreight Up, Freight Up.