The MPV market shows a positive outlook for charterers and shipowners, despite challenges such as geopolitical conflicts and expected trade tariffs. This optimism is primarily fuelled by the demand for project cargo, which supports the utilisation of Project Carriers and helps maintain higher rates.
General Cargo and Project Cargo freight costs to rise in 2025, driven by trade dynamics
Drewry’s Breakbulk Sea Transport Indices for General Cargo and Project Cargo will move up in 2025, but the gap between the General Cargo Index and the Project Cargo Index is likely to widen, driven by the distinct dynamics affecting both shipping markets. The utilisation of Project Cargo Vessels will increase amid a tightening of supply and strong demand for Project Cargo. In contrast, General Cargo vessels will have alternative methods for transporting their cargo. The overall performance of the container and dry bulk markets will significantly affect General Cargo vessel utilisation. As dry bulk freight costs are also poised to increase, the General Cargo Index will also increase. At the same time, an oversupply situation in containers could increase competition and absorb any improvements from the dry cargo market.
In the charter market, General Cargo rates are projected to rise between 1% and 7% (for different vessel sizes), while Project carrier charter rates are expected to increase 10-20% in 2025. Recent fixtures indicate a strong demand environment, including routes to the Middle East, Africa and Europe. For instance, vessels with a capacity of up to 10,000 to 15,000 dwt are chartered in the range of $12,000 to $16,000pd.
Sustained demand and low Project Cargo vessel availability will support rates until 2026
On the supply side, the MPV fleet did not grow as per our expectations, as fewer vessels were delivered and demolished, resulting in fleet growth that was not aligned with our projections; the total capacity stood at 60 mdwt. This includes vessels classified as General Cargo and Project Cargo, each with a capacity of 2,600 dwt or above. However, only a few orders were placed in the second half of the year. We have tweaked the number of vessels scheduled to be delivered by 2026, and it is indicated that deliveries are likely to be muted over the next two years. A significant portion of the General Cargo orders scheduled for 2025 will be replacement tonnage; hence, growth will be marginal.
Additionally, the increased supply of containerships will intensify competition with MPVs. In terms of Project Cargo, we expect more substantial growth for the Project Carrier fleet. On the contrary, a tight supply of Project Cargo will persist due to a low orderbook, resulting in higher charter rates. Furthermore, if delays in deliveries increase in 2025, we may see rates surging next year for project cargo.
Scrapping picked up in 4Q24. However, it is important to note that 40% of General Cargo vessels are over 25 years old, with a significant number of vessels over 30 years old. Many owners are delaying demolition as long as the vessels are operating above break-even levels. Therefore, the outlook for charter rates of General Cargo vessels of all sizes is crucial in light of potential demolitions.
Strong Asian trades to drive demand for Project Cargo
Demand for Project Cargo vessels will be robust in 2025, particularly on intra-Asia, supported by energy projects that remain on schedule. However, geopolitical risks, potential tariffs, and mild El Nino effects could significantly impact global trade, particularly for general cargo and bulk commodities.
Demand for grain, fertiliser, steel and other construction materials is expected to rise significantly through 2025, which will boost the demand for General Cargo and Project Cargo. Meanwhile, any increase in demand for these commodities is likely to be managed by the dry bulk market, which serves as a buffer.
Nonetheless, the ongoing global conflicts and potential policy shifts following the US elections pose considerable risks. The US-China trade war could affect grain and soybean trades, affecting the dry bulk sector and increasing competition for General Cargo.
Conclusion
The uptrend in Project Cargo rates is likely to persist in 2025 due to limited vessel supply and high demand. In contrast, General Cargo rates are likely to experience more moderate increases, influenced by regional trade patterns and the overall dynamics of the freight market, which includes increased competition from container shipping and dry bulk.
