Appetite for disruption?
A combination of geopolitical risk and the continuing threat of violence could have direct impacts on the dry bulk market, writes Thomas Zaidman, Managing Director, Sagitta Marine SA
The Gulf of Aden and the Red Sea remain critical arteries for global dry bulk shipping. The impact of the continuing attacks on shipping making the transit are testament to the resilience of the industry and its ability to absorb shocks.
The seafarers onboard the ships at risk from Houthi missiles can hardly be expected to share such a positive take on events, of course. Hopes are once again high that some form of ceasefire can be brokered between Israel and Lebanon, potentially enabling one front of the devastating conflict to wind down.
Whether this means an immediate return to calm in the Red Sea and Gulf of Aden remains to be seen, but the violent threat to ships and seafarers is only one issue at play as we look ahead to next year.
The much-discussed return of Donald Trump to the White House, not to mention the tremors radiating from the war in Ukraine, inject further, unprecedented levels of uncertainty into the geopolitical and shipping landscapes for 2025. This unpredictability poses challenges to forecasting next year’s dry bulk market dynamics.
The Houthis have entrenched themselves as a disruptive force in the Middle East, leveraging strategic patience and showing greater adaptability than predicted. The boldness of their attacks on vessels crossing the Gulf of Aden highlight their ability to disrupt global trade routes. Given their ideology and self-perception as central actors in the region, there is little incentive for them to de-escalate, regardless of international pressures.
Meanwhile, Donald Trump’s return to the presidency brings a highly unpredictable approach to foreign and trade policy. While the previous administration’s decisions often favoured direct and aggressive strategies, the absence of a clear and consistent framework leaves industry stakeholders guessing. This unpredictability amplifies risks for maritime operators at a time of potential fragility in the global economy.
The US accounts for approximately 10-15% of global imports of dry bulk commodities, so according to analysis by Maritime Strategies International, higher domestic infrastructure spending could be positive for US steel and cement imports, despite potentially higher prices as a result of the tariffs Trump threatens to impose.
MSI concludes that Trump’s tariff plans could spur retaliation from trading partners, particularly China, which would affect US exports, putting grains and coal trade at risk from retaliatory measures.
Even if we assume a peaceful transition of power in Washington, but no immediate end to violence in the Red Sea, we conclude it is reasonable to imagine there is potential for higher freight rates when combined with other geopolitical/climate disruptions.
Growing demand for alternative trade routes could see demand increase for vessels that are equipped for and capable of operating on extended voyages.
For cargo owners, ports and consumers, the combined disruption effects could include delayed shipments and further supply chain disruptions that have the potential to raise prices and impact global trade flows.
The intersection of Houthi commitment to disrupting any trade that it believes to be linked to Western interests whose views oppose those of its backers and Donald Trump’s sheer unpredictability creates a perfect storm of uncertainty for the dry bulk market in 2025.
We may not have seen dramatic increases in freight rates in 2024 as we witnessed in 2023 but continuing political instability in the Middle East - even if partial ceasefires can be agreed - provides a springboard for further disruption that could cause rates to increase dramatically.
Preparing for prolonged instability in key maritime corridors will require adaptability and resilience from the shipping industry and its associated stakeholders. While the immediate future remains unclear, vigilance and strategic planning will be essential to navigating the challenges ahead.
Thomas Zaidman, Managing Director, Sagitta Marine SA