Multiple geopolitical and climate shocks are creating chokepoint turmoil and are straining the dry bulk seaborne market, which is already tight due to expanding tonne-miles and seasonal demand.
Rising tonne-miles and seasonal demand are fundamental for higher freight rates
The Baltic Dry Index (BDI) continues to rise strongly in 2026, reflecting an unusual confluence of geopolitical shocks at maritime ports that, combined with structural and seasonal drivers, are creating chokepoint turmoil and taking the BDI to multi-year highs. By early September, the index reached a five-year high to over 3,600 units, showing signs of renewed acceleration. The composition of the rally shows that the Capesize has made a disproportionally large contribution, and has also been the most volatile segment, with its index surpassing 6,000 in the first week of September. Panamax freight has strengthened materially, while Supramax has risen more gradually.
Structural changes to commodity trade flows are supporting the larger-vessel market. Rising bauxite and iron ore exports from Guinea, particularly to China, are absorbing Capesize capacity and increasing tonne-mile demand. These cargoes travel long distances, creating more freight demand than an equivalent volume moving over a shorter distance. This tightens the market as ships are occupied for longer and it reduces the number available for other routes, providing underlying pressure to Capesize rates.
Coal is adding another cyclical and seasonal dimension. Disruption to energy markets, associated with the Middle East conflict, has increased the cost and reduced the availability of natural gas availability, encouraging some importing countries to shift part of their fuel demand from gas to coal. The latter is commonly carried on Panamax and Capesize vessels, so additional coal trade has strengthened both markets. This effect is being reinforced by seasonal preparation for winter in the Northern Hemisphere, when utilities and industrial consumers typically rebuild inventories and coal demand can increase.
Market tightness is intensifying amid chokepoint turmoil
The main driver of September’s rally is the simultaneous occurrence of multiple geopolitical events that are causing chokepoint turmoil and amplifying these fundamental drivers. While these events are not structural in nature (as they could ultimately be resolved), the timing and durability of any resolution remains highly uncertain, as does their impact on freight rates. They should therefore be regarded as prolonged episodic influences rather than fundamental changes to the dry bulk market.
The global distribution of these chokepoints explains why an apparently local disruption can quickly affect the wider freight market. The Suez Canal, Strait of Hormuz, Bosporus Strait, and the Panama Canal lie on major commodity routes, while alternatives such as the Cape of Good Hope add considerable distance, voyage time and fuel consumption. Disruption restrictions at one passage can also concentrate traffic at others, including the Strait of Gibraltar, Bab el-Mandeb and Malacca Strait.
The resulting diversions, delays and longer voyages absorb vessel capacity, allowing shocks in these chokepoints to affect Capesize, Panamax and Supramax freight markets far beyond the region in which they originate.
Dry bulk ship transit through the Suez Canal (and Bab el-Mandeb Strait) remained comparatively stable for the first nine months of the year, fluctuating around or above their January 2026 average, before showing signs of reduction after the Houthi blockade announced against Saudi Arabia and Saudi ports in July. The blockade introduces an additional source of uncertainty as dry bulk transit had already been depressed since the Houthi attacks on commercial ships that began in November 2023, and this year’s transit has consistently remained below the levels observed in the previous year.
Transit through the Strait of Hormuz remains severely disrupted. It collapsed around the onset of conflict, recovered briefly in June when the Memorandum of Understanding (MoU) was signed by the Iranian and US governments, but have subsequently remained far below the January baseline. The consequences extend to fertilizers and the Supramax market. The Strait of Hormuz is particularly important for seaborne exports of elemental sulphur, ammonia and urea. Estimates suggest that it handles approximately 31% of global seaborne elemental sulphur trade, 17% of ammonia and 15% of urea. Sulphuric acid has an estimated exposure of about 10%, mainly through imports into Gulf industrial and phosphate operations. Exposure is lower for other nitrogen fertilizers, phosphate products and potash.
Only part of this trade is carried by dry bulk vessels. Ammonia is transported in specialised gas carriers, while sulphuric acid moves in chemical tankers. The most relevant products for Supramax demand are elemental sulphur and urea, although Panamax ships can handle larger lots. Any upward rate pressure on these vessel classes would therefore come primarily from disruption and additional tonne-miles in alternative routes.
The Black Sea provides another channel of disruption, with traffic through the Bosphorus Strait weakening since the start of July and intensifying in August. Attacks on vessels, ports and export infrastructure have affected both Ukrainian and Russian commodity trade flows, while war-risk insurance and security costs have risen. Ports continue to operate, but intermittent interruptions and owner reluctance have made shipping less predictable. Some Ukrainian trade has shifted towards the Danube, Constanța and other European corridors, but these alternatives have limited capacity and can require cargoes to be split into smaller parcels.
Grain is the largest direct dry bulk flow affected, with Russia and Ukraine together accounting for roughly one-quarter (~25%) of global seaborne grain trade; although fertilizers, sulphur and other minor bulks are also relevant. This makes the disruption particularly significant for the Panamax and smaller vessels, such as the Handysize and Supramax.
A further constraint is emerging at the Panama Canal, where below-expected precipitation is forcing the Panama Canal Authority to reduce transit capacity and modify the allocation of booking slots. From 3 September, the daily capacity of the Neopanamax Locks has been reduced to nine vessels, while 25 daily slots remain available at the Panamax Locks. Panamax capacity is scheduled to fall further to 23 daily slots from 15 September.
The restrictions reflect low watershed inflows despite the arrival of the rainy season and water-conservation measures introduced in response to El Niño. Fewer daily transits could increase waiting times for vessels without confirmed reservations, absorbing effective fleet capacity and placing upward pressure on dry bulk freight rates, particularly in the Panamax segment.
Resolution holds the key to the freight rate risk premium
Falling traffic through a chokepoint is not automatically bullish for freight rates – if cargoes disappear due to depressed economic activity, vessel demand falls. However, when trade continues through longer routes or congested alternatives, greater vessel capacity is required to move the same volume. Combined with waiting, insurance constraints and owner caution, this reduces effective fleet capacity. Elevated bunker fuel prices are amplifying these pressures, as they increase the rate required to make a voyage economic and make inefficient routing and congestion more expensive.
Nevertheless, there are clear downside risks to freight rates. A resolution of one or more conflicts could release vessel capacity back into the market, weakening freight rates as underlying commodity trade flows remain stable. On the supply side, faster fleet growth and expanding new-vessel deliveries will accelerate capacity growth. The interplay between the normalisation of affected routes (which disruption has recently intensified) and abundant fleet supply will therefore be key in determining how long current market tightness persists.
What the present situation demonstrates is that the bulk carrier market does not need a commodity super-cycle, such as the one seen in 2007–2008, or a post-Covid recovery to squeeze capacity, lengthen voyage times and lift dry bulk freight rates sharply. For now, a modest rise in commodity exports that increases tonne-mile demand, combined with geopolitical and weather-related disruption across global shipping networks, could have a similar effect.
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