The dry bulk shipping market is facing a new round of climate-driven structural disruption windows.
Shipbroker Xclusiv pointed out in its latest weekly report that the global dry bulk market has entered the pre-stage of an “extreme climate shock cycle.” According to the latest forecast from the National Oceanic and Atmospheric Administration (NOAA), the probability of an El Niño event occurring from May to July 2026 has been raised to 82%, and the probability of it developing into a strong El Niño event by the end of the year has risen to 37%. This climate system is expected to peak between the fourth quarter of 2026 and the first quarter of 2027.
Xclusiv emphasized that, based on historical patterns, El Niño often has a “net positive impact” on dry bulk freight rates, periodically strengthening shipowners’ bargaining power by disrupting supply and reshaping trade routes.
Looking back at the previous El Niño cycle in /24, its impact has provided a clear reference. At that time, persistent drought in the Panama region caused a significant drop in Gatun Lake water levels, forcing a 46% plunge in transit volumes through the Panamax locks. However, despite capacity constraints, global dry bulk seaborne trade still demonstrated strong resilience, ultimately climbing to a record high of 5.37 billion tons. Entering the 2026 cycle, pressure on infrastructure has already become apparent: this month, the average waiting time at the Panama Canal rose to 47.9 hours, 60% higher than the pre-conflict baseline level; meanwhile, the Gatun Locks are scheduled for dry dock maintenance in June, which will further reduce the daily available transit window to just 16 transits.
With the triple factors of climate anomalies, geopolitical bottlenecks, and infrastructure maintenance, the major vessel segments are brewing deeper structural revaluations. In the short term, high temperatures in Asia combined with a weaker Indian monsoon in the second and third quarters of 2026 are expected to create regional hydropower output gaps, thereby boosting seaborne thermal coal import demand, benefiting spot Capesize and Kamsarmax tonnage on Pacific routes. At the same time, grain trade flows are being reshaped: expectations of reduced wheat production in Australia will force Asian buyers to turn to distant alternative supplies from Brazil and Argentina, significantly lifting ton-mile demand for Kamsarmax and Panamax vessels.
More critically, restricted transit through the Panama Canal will directly alter grain export routes from the U.S. Gulf of Mexico, forcing some cargoes to completely divert via the Cape of Good Hope, increasing voyage distances by up to 50%. This structural rerouting will significantly compress effective vessel supply and systematically raise global ton-mile demand levels, thereby supporting overall freight rates.
In the ship sale and purchase (S&P) market, Xclusiv noted that current structural supply contraction is resonating with a strengthening forward freight rate curve. The FFA market shows the Capesize forward curve maintaining a robust upward structure, with full-year expectations remaining strong; meanwhile, VLSFO fuel prices in Rotterdam remain elevated at around $768 per ton, further increasing the importance of route fuel efficiency management in long-haul operations, driving market buyers to concentrate on modern, fuel-efficient vessels, particularly Kamsarmax and Ultramax eco-ship types.
Notably, the current market tightness is not solely driven by cyclical expectations. Years of sustained profitability have left shipowners with ample cash flow; many have completed debt deleveraging, significantly improved balance sheets, and lowered breakeven points. In the absence of financial pressure, the willingness to sell secondhand vessels has markedly decreased, forming a “low-supply holding” pattern, which provides more solid support for asset price floors.
Xclusiv concluded that the potential upward momentum in freight rates, combined with structural holding reluctance, will jointly build a more defensive secondhand vessel market environment. For institutional buyers looking to lock in tonnage in advance, the market will present a typical pattern of “highly resilient pricing + low elasticity supply,” with limited downside for asset prices, while the elasticity of the freight rate upcycle may gradually be released over the next two quarters.
