Shipping markets rarely announce the top with any clarity. More often, the argument about whether the peak has arrived only really starts when freight rates are still climbing, asset values are making less and less conventional sense, and owners are sufficiently confident to keep buying ships at prices that would have looked ridiculous a few months earlier. Chief correspondent Adis Ajdin assesses where we are in today's record-high shipping cycle.
Clarksons Research's cross-sector ClarkSea Index has just set another record, tanker earnings have moved into territory that would have been dismissed as fantasy at the start of the year, capesize returns remain strong, and containership charter rates are still elevated. There is, on the face of it, very little to suggest that the boom has run its course. But there are enough signs beneath the surface to start asking a more awkward question: how much of this cycle is left, and which sectors are closest to finding out?
The answer is unlikely to be the same across shipping. Containers are heading into a huge delivery programme at the same time as the return to Suez threatens to release a significant amount of effective capacity. Tankers are enjoying the most extreme freight market of the cycle, yet the orderbook is swelling and freight has become expensive enough for Poten & Partners to ask whether transportation costs themselves could begin to weigh on oil demand. Dry bulk looks better balanced, helped by genuine tonne-mile growth rather than disruption alone.
Across all three markets, though, owners are behaving in a familiar way: ordering more ships, paying up for secondhand tonnage, and keeping elderly vessels trading.
One transaction perhaps captures the mood better than any index. Gibson Shipbrokers has the 2009-built suezmax Karolos changing hands for $92m and the 2010-built Tataki at $95m, while its benchmark price for a new suezmax is around $93m. In other words, buyers are now prepared to pay newbuilding money for ships approaching 17 years of age.
VLCCs have become stranger still. The 2011-built Sea Leopard has reportedly sold for around $170m after an earlier deal at roughly $136m failed, while two other 2011-built VLCCs, Seeb and Samail, have gone for $160m each. Gibson noted last week that there was "no sign of this bull run slowing," describing appetite for tonnage as "insatiable."
That appetite is understandable. Clarksons' ClarkSea Index has climbed to $75,658 a day, its fourth successive record, while average earnings during the third quarter reached $46,384 a day, above the $44,222 recorded during the second quarter of 2008. Short-term conditions remain exceptionally strong, and in several markets there is still precious little sign of prompt tonnage becoming easier to find.
Some 71m compensated gross tonnes have been ordered this year, putting contracting broadly in line with the record pace of 2007, while the global orderbook has reached 226m cgt, up around 25% year-on-year. Clarksons expects shipyard output to rise toward 64m cgt next year and 69m cgt in 2028. The comparison with the last supercycle has its limits — today's orderbook is equivalent to around 23% of the fleet, against more than 50% at the 2008 peak — but the direction of travel is clear.
What is more striking this time is what is not leaving the fleet. Almost nothing is being scrapped.
Gibson titled its latest recycling commentary "I See No Ships," noting that demolition yards are struggling to identify where the next meaningful tranche of candidates will come from. With freight markets strong and secondhand values surging, owners have little incentive to send elderly ships to the beach when they can either keep trading them or sell them into a market where immediate availability commands a remarkable premium.
Of the major sectors, containers remain the easiest place to see where the pressure could start building first.
BIMCO chief shipping analyst Niels Rasmussen expects market conditions to begin weakening towards the end of this year. Even assuming every containership reaching 25 years is recycled, BIMCO calculates that fleet capacity could still grow by around 9% annually between 2027 and 2029, while ship demand is expected to increase by only 3% to 5% a year.
Rasmussen estimates that roughly 10% of current containership demand could disappear if services complete their return from the Cape of Good Hope to the Red Sea route. That return is no longer theoretical. Linerlytica says more than 140 ships totalling over 2m teu have gone back through Suez since May, while Sea-Intelligence recently put Red Sea routing at around 27% normalisation.
Against that sits a record containership orderbook of around 15.6m teu.
"We expect container market conditions to begin weakening toward the end of 2026," Rasmussen tells Splash.
So far, the charter market has remained remarkably firm. The spot market is beginning to look less convincing. Xeneta chief analyst Peter Sand said last week that the Far East-US trade had reached its post-Hormuz peak, while Asia-Europe rates have been retreating since July.
Carriers have plenty of levers to pull if the market softens, including slower sailing, blank sailings, tighter capacity management, and eventually handing chartered ships back. The bigger issue is what happens to the amount of large tonnage still scheduled to emerge from Asian yards, much of it above 12,000 teu, while a large share of the chartered fleet that can be returned sits below 8,000 teu. That makes cascading one of the more obvious headaches for 2027.
Dry bulk presents a less dramatic picture. The market has had a strong year, particularly for capes, but much of the support has come from real cargo growth and longer trading distances rather than purely from geopolitical disruption. Guinean exports, firm Chinese import demand, and a greater share of Atlantic-to-Asia trading have all provided tonne-mile support.
Maritime Strategies International (MSI) expects dry bulk trade to grow around 2% next year, with vessel demand increasing by about 3.7% and effective fleet supply rising by roughly 4%.
"Conditions are expected to remain firm in 2027, although the balance begins to soften marginally," MSI director Will Fray says.
BIMCO also sees bulkers as better protected than containers or crude tankers. Around 14% of current capacity is due to arrive before the end of the decade, while recycling potential amounts to roughly 8% of today's fleet. More importantly, much of the recent increase in demand has come from structural changes in trading distances rather than temporary war-related detours.
Tankers are far harder to call because the numbers have moved so far beyond anything resembling a conventional market.
Affinity notes that average suezmax spot earnings since 2000 are around $35,000 a day. Last week TD20 jumped by $150,000 a day in a single session — not to $150,000, but by that amount — before moving above $500,000 a day. VLCC earnings have meanwhile traded above $1m a day on benchmark routes.
Clarksons' third-quarter averages were already extraordinary, with VLCCs at $277,995 a day, suezmaxes at $228,262, and aframaxes at $119,189.
Hormuz explains much of this. Oil flows have recovered, but the system moving those barrels bears little resemblance to the pre-war market. Shuttle voyages, ship-to-ship transfers in the Gulf of Oman, war-risk restrictions, and longer, less efficient employment patterns have absorbed a huge amount of effective tanker capacity — a dynamic project logistics teams chartering tonnage for energy cargo should factor directly into routing and cost planning.
What has changed recently is that freight itself is beginning to have a meaningful impact on the delivered cost of oil.
Poten & Partners last week asked whether tanker rates have now reached levels capable of restricting oil demand. At the beginning of this year, Poten calculates that carrying Middle Eastern crude to Asia on a VLCC cost around $1.73 per barrel, equivalent to roughly 3% of the delivered cost of the crude. At recent VLCC rates of around $1.3m a day, freight rises to almost $33 a barrel, or around 27% of the delivered cost.
For now, Poten says the oil market remains sufficiently tight that most charterers have little choice but to pay up. Its warning is what happens when that changes.
"As soon as the crude oil market loosens, tanker rates will come off the boil quickly," the broker warned on Friday — a dynamic that makes crude tankers the biggest wild card in 2027.
Braemar's Henry Curra sees no quick end to the major conflicts supporting tanker freight and has raised the broker's VLCC and suezmax forecasts for 2027 and 2028. At the same time, the supply side is starting to become much harder to ignore.
The tanker orderbook now stands at around 27% of the fleet, including roughly 37% for VLCCs and 32% for suezmaxes. Affinity says tanker fleet growth has already reached 3.8% this year, with deliveries exceeding the whole of 2025, and expects unusually strong additions to continue through 2028. BIMCO calculates that crude tanker capacity could increase by 26% by the end of the decade.
Normally, an ageing fleet would offset a meaningful part of that growth through recycling. Today, many of the ships old enough to scrap are either operating in sanctioned trades or earning far too much money to retire.
Containers look closest to a conventional cyclical turn as a huge delivery programme meets slowing demand growth and the gradual return to Suez. Product tankers face a sizeable supply programme of their own. Dry bulk appears better balanced and looks more likely to soften than collapse. Crude tankers remain the exception. As long as Hormuz keeps ships tied up in inefficient trading patterns, owners can continue earning rates that defy the usual relationship between fleet growth and cargo demand. But the longer those earnings persist, the stronger the supply response becomes.
Shipping has spent much of the past few years being rescued from excess capacity by events owners could never have planned for: covid, Ukraine, the Red Sea, and now Hormuz. Each time, disruption removed effective supply faster than yards could replace it.
Owners have reacted exactly as they tend to when freight markets become exceptional. They have bought ships, ordered more, and stopped scrapping old ones.
An Affinity report from last week sees no imminent cliff edge, but argues that gravity will ultimately reassert itself.
"Many have been calling the market's demise for at least the last two years," the broker pointed out. "It's not happened yet and it looks like it'll hold up for a while yet. How long? Who knows?"
MSI has its own take on where each sector is on its own shipping cycle, carried below.
Copyright: https://splash247.com/how-close-is-shipping-to-the-top/
Mr Adis Ajdin