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Since mid 2024 mid-2024 shipping rates have been steadily decreasing.The Baltic Dry Index, which measures the cost of shipping dry cargo, is down 27%. This decline followed a period of relative stability in 2022/23, which came after years of extreme fluctuations including a record high.
So, what's driving this drop—and could rates move even lower?
Shipping plays a crucial role intaking New Zealand logs to world markets and represents a significant cost. Shipping typically accounts for 30% to 40% of the total landed cost in China. What makes shipping particularly challenging is its unpredictability—costs rise and fallwith global market conditions. In some cases, competitors in other countries have access to cheaper transport alternatives, which can put New Zealand at a disadvantage.
Figure 1. Shipping Rate Indexes
In 2024, the volume of dry bulk cargoes shipped globally, which includes NZ logs,reached 5.8 billion tonnes—a 3.3% increase from 2023. The global economy grew at a moderate pace. While some countries were still recovering from earlier interest rate hikes, global inflation had eased, and most central banks began lowering interest rates. Chinese exports were solid and U.S. consumer demand remained strong. By 2024 shipping volumes increased by 12.7% from 2019.
But fleet size grew even faster—by 17.3% over the same five-year period. Generally, when ship supply grows faster than demand, freight costs drop. Yet surprisingly, the Baltic Dry Index was still higher than it was in 2019. This suggests that other factors were at play.
Figure 2. Dry Bulk Fleet Size / Volume Shipped
Several global disruptions have constrained the availability of ships, pushing freight rates higher than expected.
A United Nations report confirmed that most of the changes in the Baltic Dry Index in 2023/ 24 have been driven by transit delays in the Panama Canal and security threats in the Red Sea.
Fuelis one of the largest operating costs for ships, and fluctuations in bunker fuel prices have a direct impact on freight rates. After spiking in 2022 due to the global energy shock following the war in Ukraine, bunker fuel prices eased through 2023 and into 2024 as oil markets stabilised and global economic uncertainty reduced demand. In 2025, prices have remained relatively stable,though slightly elevated compared to pre-COVID levels. The introduction of more stringent environmental regulations has also driven up the cost of compliant fuels—such as very low sulphur fuel oil (VLSFO) — and incentivised operators to shift toward alternative fuels like LNG. However, these fuels come at a higher cost and require specialised infrastructure. While lower fuel prices have helped reduce operating costs recently, the long-term outlook is uncertain due to geopolitical risks and the push for decarbonisation, both of which could keep fuel prices volatile and influence future freight rate trends.
The global dry bulk fleet is set to grow. The ratio of new ships on order compared to the current fleet rose from 8% in early 2023 to 12% by early 2025. Oversupply remains a risk, which could push rates lower—especially if global trade slows.
However, ship owners are also investing to meet new environmental targets and improve operating efficiency. While much of the fleet growth is concentrated in larger ships, particularly vessels in the Panamax class (68,000 to 85,000 DWT), shifts inshipping rates in this segment often affect the entire market.
The shipping industry faces strong pressure to reduce greenhouse gas (GHG) emissions. Under new targets set by the International Maritime Organization, emissions must fall byat least 30% by 2030 and reach net zero by 2050. To meet these goals, shipping companies are:
Shipping rates have been falling due to increased ship supply and softening demand. Yet, geopolitical tensions, climate-related disruptions, and trade conflicts havekept rates higher than they might otherwise be.
Looking ahead, shipping capacity is likely to keep growing, as owners respond to trade opportunities and the need to meet environmental targets. Weakening global demand for goods, including softening Chinese demand could put further downward pressure on rates. On the upward side, India’s coal consumption is expected to increase, while Brazil is expected to export massive soybean volumes to China. All this suggests that the future direction of ocean freight continues to be uncertain