The capesize market is ending the year with a burst of momentum rarely seen outside cyclical peaks, as tightening tonnage and strengthening long-haul trade routes drive spot rates to their highest levels in two years.
Spot rates leapt by more than $6,000 yesterday to approach the $45,000 mark.
Despite softness in global steel markets – with output down 1.5% year-on-year and China’s production off by 4% – seaborne iron ore volumes are growing. Jefferies, an investment bank, attributed the strength in part to declining Chinese mine output, driving increased reliance on imports. On a ton-mile basis, capesize demand is up 8% through November, significantly outpacing fleet growth of just 2% over the same period.
Fearnleys has flagged growing tightness in prompt availability. “Ballasting tonnage is very tight for December dates and relatively more tonnage available for first half January. Spot tonnage out of Far East is tight,” the Oslo-based shipbroker reported, underscoring the lack of nearby supply to meet rising demand in Asia.
Across the Atlantic, signs of a similar squeeze are emerging. Greek broker Intermodal reported “a noticeable pick-up in North Atlantic fronthaul interest,” adding that as “ships grew scarcer, regional indices shifted sharply higher, reflecting a clearer tightening in prompt positions and a marked improvement in market confidence.”
A structural change in trade flows is further supporting the capesize segment. Over the past three years, West Africa has emerged as a third major loading region alongside Australia and Brazil. Jefferies noted that long-haul iron ore shipments from Brazil and long-haul bauxite exports from West Africa have driven a 5% increase in total capesize loadings this year, while Australian volumes remain flat.
Looking ahead, the ramp-up of Guinea’s massive 120m tonnes per annum Simandou iron ore project is expected to further tighten the market. Jefferies estimates capesize demand could rise by 6% annually in both 2026 and 2027 if Simandou volumes are additive, or 4% if they displace Australian exports. With newbuild deliveries projected at just under 3% during the same period, utilisation is expected to climb from 84% this year to 90% by 2028.
As a result, Jefferies has raised its capesize rate forecasts to $27,500 a day in 2026, $30,000 a day in 2027 and $32,500 a day in 2028, up from a previous flat estimate of $22,500 a day. The bank also suggested the long-dormant trend of larger vessels outperforming smaller bulkers may now be reasserting itself, comparing the emerging pattern to the recent outperformance of VLCCs in the tanker market.
“Capes seem primed to follow the same path as VLCC tankers, that being the larger vessel classes outperforming the smaller segments in periods of strong fundamentals,” Jefferies said.
