As the COVID-19 pandemic fades into a not-so-distant memory, one can remember a time when “Supply Chain Disruptions” made every headline and container backlog in the Port of Long Beach required direct intervention from the U.S. government. Since the highs hit in the fall of 2021 freight prices have dropped to lows not seen since June 2020. Coupled with a recent break in wheat prices, decreased ocean freight costs have helped turn the tides back in the importers’ favor.

As Jay O’Neil of HJ O’Neil Commodity Consulting says, “the current outlook is not bullish, but vessel owners believe things must go up, as they don’t believe they can go lower…”

The Baltic Index price chart of dry bulk freight rates shows the impact on rates from the Russian invasion of Ukraine.

On February 6, the Baltic Dry Index hit 621, a level not seen since June 2020. The index has fallen 88% from its peak in October 2021. Source:

The China Effect

In recent years, dry bulk freight and Chinese economic growth have become interconnected. Dry bulk vessel sizes known as Handy (25,000 to 39,000 deadweight tons (dwt)), Handymax (40,000 to 49,999 dwt), and Panamax (60,000 – 78,999 dwt) that carry wheat and other grain cargos are also used to ship iron ore. And, according to S&P Global Commodity Insights, China accounts for almost 60% of dry bulk demand to help supply the country with over 1.1 billion MT of iron ore.

Until recently, however, China’s Zero Covid policy severely impacted economic growth. In 2022 China’s GDP growth slowed to 2.8% from 8.1% in 2021, thus diminishing iron ore demand by 2% as steelmaking slowed. With decreased Chinese vessel demand, freight rates have plummeted. As the seasonal lulls in economic activity around the Chinese Lunar New Year holiday dissipate, China remains a wildcard in global shipping as the country relaxes its COVID-19 restrictions, potentially opening the door for accelerating growth and industrial activity.


According to Lloyd’s List, in the fall of 2021, 5.7% of the world’s bulk fleet was anchored off Chinese ports due to strict quarantine requirements. As the global economy started its recovery from the pandemic, immense port congestion tied up hundreds of vessels, sending dry bulk freight soaring. Easing congestion in Chinese ports is expanding dry bulk capacity and will continue to play an essential role in freight markets in 2023, especially as China lifts more COVID-related restrictions.

Map showing massive vessel congestion around Chinese ports in 2021 that affected freight rates.

Port congestion in China supported the bulk carrier rates in 2021, with upwards of 600 vessels queued to load or discharge cargo. Source: Lloyds List Maritime Intelligence.

Vessel Supply and Demand

Over the last 13 years, the dry bulk vessel fleet has increased steadily, marking an average yearly increase of 4.8%, total growth of 53.8% since 2010. In 2022 dry bulk fleet growth slowed to 2.8% and is forecast to slow to 2.3% in 2023 (S&P Global, HJ O’Neil Commodity Consulting). Meanwhile, dry bulk demand declined by 1.9% in 2022 due to low iron ore and reduced grain shipments. If vessel supply continues to outpace demand, the downward pressure will continue to impact ocean freight.

Bar chart showing a 53% increase in the global dry bulk vessel fleet from 2007 to 2020 to show the effect on freight rates.

The bulk vessel fleet size had grown by 53.8% on a steady pace over the last decade. Source: Drewry Shipping Consultants Ltd.

Oil Prices

After Russia’s invasion of Ukraine in February 2022, oil prices skyrocketed as sanctions were placed against Russia, the world’s second largest oil produce. As oil prices increase, the fuel input cost for dry bulk vessels also increase, supporting freight prices. In the year since the invasion, oil prices have normalized, taking pressure off the market.

Will This Pattern Hold?

As the freight market continues in freefall, importers and exporters must ask if this pattern is sustainable. According to Breakwave Advisors “one of the slowest weeks of the year for Chinese activity is now behind us” as we move into February and past the Lunar New Year festivities. Vessel supply and demand, port congestion, oil prices, and the on-going supply chain disruptions will continue to impact the market as economies normalize post-COVID; however, China remains in the driver’s seat of global freight. The resilience of the Chinese economy will be put to the test as economic activity increases post COVID, but for now, the world is waiting and all eyes are on China.

By Tyllor Ledford, USW Market Analyst


This was supposed to be the year dry bulk freight vessel owners turned a profit, Jay O’Neil, a commodities consultant and author of a weekly transportation report recently commented. And U.S. Wheat Associates (USW) shared similar thoughts early in 2021. Instead, S&P Global Market Intelligence noted recently that freight rates for dry bulkers have fallen over the past three months after rates peaked earlier than expected in the second quarter of 2022.

As rates recently climbed, however, O’Neil said the freight market may have finally found its bottom.

Bearish Factors

Since early 2020, shipping has faced uncertainties: labor shortages, various COVID restrictions made worse by each country applying different restrictions, port congestion, and supply chain breakdowns have all competed to make shipping tough. The challenges to shipping logistics have abated. As a result, the number of available vessels floating in the dry bulk freight market has increased.

As China Goes…

China plays such a dominating role in the dry bulk shipping market that analyzing economic activity there can predict the dry bulk fleet’s prospects. China’s economic growth slowed under the government’s zero-COVID policy. The global iron ore trade, one aspect that drives the dry bulk fleet, was down 6% last month compared to a year ago. An analyst with S&P Global Market Intelligence said “slower than expected economic growth” could exist through the second half of 2023. O’Neil covered bearish factors for the dry bulk freight market for USW’s 2021 Crop Quality report.

Russian Coal

Putin’s war in Ukraine has also rerouted some cargo flows and driven up demand for coal, another commodity that absorbs dry bulk shipping capacity. Sanctions on Russian gas supplies have quickly reversed European Union plans to close many coal-fired plants. While the E.U. looks to the United States for coal imports, India and China are taking advantage of cheap Russian coal and changing demand for different bulker size categories.

Another key component that helped bring down dry bulk shipping rates is the easing of port congestion.

“Inefficiencies of last year do not apply to the current market anymore and the supply-demand equation is more straightforward,” said one ship owner. AXS said a primary driver behind the lower rates is the drop in ton-miles.

Overall, Breakwave Advisors, a shipping publication, agreed saying, “Following a period of high uncertainty and significant disruptions across the commodity spectrum, the gradual normalization of trade is shifting the market’s attention back to the traditional demand and supply dynamics that have shaped dry bulk profitability for decades.”

This was all good news for dry bulk freight customers, including the world’s wheat buyers.

Line chart shows the Baltic Dry Index change from April 2022 to September 2022

Stormy Seas for Dry Bulk Freight. After peaking in the second quarter of 2022, the Baltic Exchange Dry Index retreated before bouncing up in September. Some suggest the market found a bottom, yet bearish economic factors continue.

Turning Tides

Yet signs of rate recovery are evident. The Baltic Index on September 9 notched its largest weekly increase in 8 years, according to Reuters data. The index was up 12% to 1,213. On September 12, the Baltic Index marked its fourth consecutive session of gain. AgriCensus, in a story published on August 31, noted that the purchasing managers’ index (PMI) rose to 49.4 in August, up 0.4 compared to July. But still, the index remained below the 50-point mark which separates contraction from growth.

Despite the current strengthening in the shipping index, generally bearish factors affecting dry bulk freight rates such as China’s economic situation remain. Those that follow the market closely say that rebound may simply be a market correction. For now, it seems like vessel owners may have to wait longer before turning that profit that many predicted not long ago.

By Michael Anderson, USW Market Analyst