Shipping Market at a Cyclical Peak? A Look Across Major Segments

The shipping market rarely sends a clear signal that an upcycle has reached its peak. When freight rates remain high, vessel values rise and shipowners continue to place newbuilding orders, the question of when the market may turn becomes increasingly relevant.

At present, indicators suggest that the upcycle is not yet over, but supply-side pressures are gradually building. The level of risk also varies across segments: container shipping may come under pressure sooner, dry bulk remains relatively balanced, while tanker markets continue to depend heavily on geopolitical developments.

Market Remains Strong, but Supply-Side Pressure Is Building

The ClarkSea Index, compiled by Clarksons Research as a broad measure of earnings across shipping segments, has recently reached a new high. Tanker earnings have risen sharply, Capesize earnings remain elevated, while the containership charter market continues to show strength.

These developments suggest that the market has not yet entered a clear downturn. However, there are growing signs of pressure on the supply side.

According to Gibson Shipbrokers, the 2009-built Suezmax Karolos was reportedly sold for around $92 million, while the 2010-built Tataki changed hands for approximately $95 million. By comparison, the current price of a newbuilding Suezmax is around $93 million.

Values for large crude oil tankers (VLCCs) have also remained high, with some vessels around 13 years old reportedly trading at $160–170 million. Gibson noted that demand for tanker tonnage is currently very strong.

Meanwhile, the global orderbook has reached 226 million CGT, up around 25% year on year. One notable feature of the current cycle is that demolition activity remains low. With operating earnings still attractive, shipowners have little incentive to send older vessels to the scrapyard.

As a result, the global fleet continues to expand, increasing the risk of overcapacity in some segments in the years ahead.

Container Shipping: Supply Pressure Becoming More Apparent

Among the major shipping segments, container shipping is showing the clearest signs of entering a transitional phase.

Niels Rasmussen, Chief Shipping Analyst at BIMCO, expects container market conditions to begin weakening towards the end of 2026. Even if all containerships aged 25 years and above were recycled, fleet capacity could still grow by around 9% annually between 2027 and 2029, while demand is expected to increase by only around 3–5% per year.

Supply pressure could intensify further as services gradually return to the Suez Canal instead of continuing to reroute around the Cape of Good Hope. With shorter transit times, less vessel capacity is required to maintain the same service frequency.

Against the backdrop of a containership orderbook of around 15.6 million TEU, BIMCO expects “container market conditions to begin weakening towards the end of 2026.”

The charter market remains relatively firm, but the spot market has already shown signs of losing momentum. Carriers still have a range of tools to manage capacity, including slow steaming, blank sailings and the redelivery of chartered-in vessels.

However, one factor to watch in 2027 is the cascading effect, as large numbers of new containerships, particularly vessels above 12,000 TEU, are delivered. As these ships are deployed on mainline services, smaller vessels may be displaced onto other trades, potentially increasing competitive pressure in those markets.

Dry Bulk: Market Remains Relatively Balanced

Compared with container shipping, the outlook for dry bulk is less volatile.

The market has had a relatively positive year, particularly in the Capesize segment. Growth has been driven not only by cargo demand but also by longer average sailing distances, supporting the market through the tonne-mile effect.

China's import demand, together with the development of trade flows between the Atlantic and Asia, continues to support the segment.

Maritime Strategies International (MSI) expects dry bulk trade to grow by around 2% next year. MSI Managing Director Will Fray said: “Conditions are expected to remain firm in 2027, although the balance begins to soften marginally.”

Overall, changes in trade routes and longer sailing distances are providing a relatively supportive foundation for the dry bulk market. However, if fleet growth continues to outpace demand, this balance could come under pressure.

Tankers: Highly Dependent on Geopolitical Developments

The tanker market is currently the most volatile of the major shipping segments.

Spot earnings for tankers have risen far above historical averages. While average Suezmax earnings since 2000 have been around $35,000 per day, VLCC earnings on some benchmark routes have recently exceeded $1 million per day.

The main driver has been disruption linked to the Strait of Hormuz. Although oil flows have partially recovered, changes in trading patterns have significantly reduced effective shipping capacity in the market.

However, high freight rates could eventually begin to weigh on demand. According to Poten & Partners, transportation costs currently account for nearly 27% of the delivered cost of crude oil, a level that could place additional pressure on shipping demand if sustained for an extended period.

Poten & Partners warned: “As soon as the crude oil market loosens, tanker rates will come off the boil quickly.”

This makes the outlook for the tanker segment particularly difficult to predict in 2027. Notably, the tanker orderbook is currently equivalent to around 27% of the existing fleet, while demolition activity remains low.

Has the Shipping Market Reached Its Peak?

In recent years, the shipping market has repeatedly avoided a major overcapacity problem as supply chains have been hit by a series of shocks, from the COVID-19 pandemic and the Russia–Ukraine conflict to the Red Sea crisis and disruptions around the Strait of Hormuz.

Each disruption has reduced effective shipping capacity, while shipowners have responded by ordering new vessels, buying secondhand tonnage and keeping existing ships in service rather than sending them for demolition. This has continued to support the market in the short term, but has also added to future fleet supply.

The key question, therefore, is not simply whether the market has reached its peak, but which segment will come under pressure first and how significantly new capacity will affect market conditions.

Container shipping is showing clearer signs of potential weakening, with fleet growth expected to significantly outpace demand growth. Dry bulk continues to have a relatively balanced foundation, supported by cargo growth and longer sailing distances. Meanwhile, the tanker market remains heavily dependent on geopolitical developments and the extent of disruption along major energy shipping routes.

According to Affinity, although the shipping industry has repeatedly been forecast to enter a period of weakness over the past two years, that scenario has yet to materialize. The upcycle may still have room to run, but when the cycle will turn remains an unanswered question.

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Source: Phaata.com (According to Splash247)

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