In today's challenging and uncertain market environment, the project carrier industry shows promising prospects for 2025, with robust demand and continued potential for freight rate increases. While geopolitical conflicts and trade tariffs persist, the demand for project cargo has boosted vessel utilization rates, helping maintain high freight levels.
Diverging Market Dynamics
Drewry's Multipurpose Shipping Index forecasts rising freight rates for both general and project cargo in 2025, with the gap between the two sectors likely to widen further. Project carriers face growing demand amid tight supply, which is expected to push rates higher. In contrast, general cargo vessels benefit from more flexible transportation alternatives, making their utilization rates more volatile.
The container and dry bulk markets will directly influence general cargo vessel utilization. While rising dry bulk rates may lift the general cargo index, container ship oversupply could intensify competition and offset these gains. Charter rates for general cargo vessels are projected to increase by 1% to 7% depending on vessel type, while project carriers could see rates surge by 10% to 20%.
Strong Demand Meets Limited Supply
Recent chartering activity demonstrates robust demand, particularly on routes serving the Middle East, Africa, and Europe. Vessels with capacities between 10,000 and 15,000 deadweight tons (dwt) are commanding daily rates of $12,000 to $16,000. This strong demand coupled with limited project carrier supply is expected to maintain favorable freight rates through at least 2026.
The multipurpose vessel (MPV) fleet has grown slower than anticipated, with fewer deliveries and scrappings than expected. The current total fleet capacity stands at 60 million dwt for vessels above 2,600 dwt carrying both general and project cargo. While some new orders will enter service in 2025, most represent replacement tonnage rather than significant fleet expansion.
Competitive Pressures and Fleet Challenges
Increasing container ship capacity will heighten competition with MPVs. For project carriers, fleet growth remains constrained by low order volumes, suggesting continued tight supply and higher charter rates. Potential delivery delays in 2025 could trigger sharper rate increases.
Scrapping activity picked up in Q4 2024, but 40% of the general cargo fleet is now over 25 years old, with many vessels exceeding 30 years. Many owners are delaying scrapping while vessels remain marginally profitable, creating potential challenges for charter rates and future demolition activity.
Regional Demand and Global Risks
The outlook for project cargo demand remains positive, particularly in Asia-Pacific where ongoing energy projects support regional growth. However, global trade continues to face geopolitical risks, potential trade tariffs, and the mild effects of El Niño on general cargo and bulk commodities.
Inflationary pressures are expected to drive significant increases in demand for grains, fertilizers, steel, and construction materials in 2025, benefiting both general and project cargo sectors. The dry bulk market will serve as a buffer against sharp fluctuations in commodity demand.
Global conflicts and potential policy shifts following U.S. elections present significant risks. Escalating U.S.-China trade tensions could particularly impact grain and soybean trade, potentially disrupting dry bulk markets and intensifying competition for general cargo.
In summary, project cargo rates appear set for continued growth in 2025 due to constrained vessel supply and strong demand, while general cargo rates may see more moderate increases influenced by regional trade patterns and competitive pressures from container and dry bulk sectors.