Dry bulk freight rates surge up to 64% this year as large vessels dominate iron ore long-haul routes

Freight rates for dry bulk vessels carrying iron ore, coal and grain have surged as much as 64% this year, with large ships benefiting most as long-haul iron ore shipments increased while vessel supply remained constrained. Mid-size vessels saw smaller gains as new ship deliveries accelerated.

The Korea Ocean Business Corp. (KOBC) published a special research note Thursday titled "Mid-Year Review and Outlook for the 2026 Dry Bulk Market," analyzing trends and prospects in the dry bulk shipping sector.

According to the report, average freight rates from the start of the year through mid-August rose year-on-year across all vessel classes. Capesize vessels — those of 100,000 tons or more — posted the largest gain at 64.0%. Panamax rates rose 52.1%, Supramax 45.9% and Handysize 38.3%.

A base effect from weak rates last year partly contributed to the gains. Rates during the same period last year were roughly 19–26% below 2024 levels depending on vessel class. Even against 2024, however, this year's average Capesize rate was 31.6% higher. Panamax rates were 13.2% above 2024 levels, Supramax 9.2% and Handysize 11.6%. Capesize rates in particular exceeded twice their long-term average.

The rise in large-vessel rates was driven by growing demand for long-haul iron ore transport and limited fleet supply. Maritime iron ore volumes rose 2.0% from last year. On major China-bound routes, cargo volumes climbed 2.8%, and with a greater share of long-distance freight, ton-miles — a measure of cargo volume multiplied by distance traveled — increased 3.6%. Because longer routes keep vessels occupied for more time, the same volume of cargo generates greater demand for ships.

By contrast, the Capesize fleet grew just 1.4%, the slowest rate among major vessel classes. With ships tied up longer on extended routes and relatively few new vessels entering service, the supply-demand imbalance pushed rates higher.

The picture was different for mid-size vessels. Grain transport demand increased, but fleet supply grew just as quickly. Panamax and Supramax fleets expanded 5.4% and 4.2%, respectively, from the same period a year earlier. Minor bulk cargo — including timber, cement and fertilizer, excluding iron ore, coal and grain — grew just 0.3%.

KOBC expects dry bulk freight rates to remain above last year's levels through the end of the year, though it anticipates continued divergence by vessel size and cargo type.

Capesize vessels are projected to perform best among major classes, supported by sustained long-haul iron ore demand and relatively limited new vessel supply. For Panamax, grain and coal demand is expected to be offset by new ship deliveries, capping further rate gains. Supramax stands to benefit from rising grain shipments, but fleet growth and sluggish minor bulk volumes were cited as headwinds.

The current rate strength is unlikely to extend into next year, however. Forward freight agreements (FFAs), which allow market participants to trade future freight rates in advance, showed fourth-quarter FFA prices as of Aug. 14 trading above spot rates — reflecting market expectations that the rally will hold through year-end. Annual FFAs for next year were priced 13–18% below spot levels, signaling a likely normalization of rates over the medium term.

KOBC identified the key variables to watch as iron ore shipments from Brazil, Australia and Guinea; grain exports from the United States and South America; coal demand from China and India; and changes in actual available vessel capacity as newly ordered ships are delivered.

"The dry bulk market is currently in a phase where cargo demand, route composition and supply growth are acting differently across vessel classes, rather than all moving in the same direction," the report said. "Market participants need to look beyond near-term rate strength and also consider next year's new vessel deliveries and shifts in long-haul cargo flows."