Market Insight

By Nikos Tagoulis, Head of Research Department

China's rapidly expanding automotive exports have emerged as a key driver of the Pure Car and Truck Carrier (PCTC) market in 2026, supporting vessel utilisation and elevated charter earnings.

According to the China Association of Automobile Manufacturers (CAAM), exports reached 8.205m vehicles in January-September, up 65.8% y-o-y, including 4.006m new-energy vehicles (NEVs). September alone saw 1.053m exports, of which 571,000 were NEVs, up 160% y-o-y. Meanwhile, domestic NEV sales contracted by 9.4% y-o-y, reinforcing manufacturers' focus on overseas markets amid subdued domestic demand and intense price competition.

Behind this export expansion lies China's highly integrated automotive supply chain, spanning mineral processing, battery production, electric motors and vehicle assembly. According to the IEA, China accounts for 91% of global refining of magnet-related rare earths, 94% of sintered permanent magnet production and over 80% of battery cell output. Rare-earth magnets are used in many EV motors, rather than in lithium-ion batteries themselves. Such dominance provides Chinese automakers with substantial economies of scale and cost advantages, while exposing overseas manufacturers to potential supply disruptions.

For the shipping sector, the implications extend beyond rising export volumes. Long-haul car shipments from China to Europe and Latin America generate considerable car-mile demand, while limited backhaul cargoes and Cape of Good Hope diversions prolong round voyages, tying up vessels and reducing effective fleet availability. Routing patterns are diverging, however, with some Chinese operators resuming Suez transits, while major European and Japanese operators continue to favour the Cape route. Against this backdrop, the 1-year time-charter rate for a 6,500-CEU PCTC climbed steadily through 2026 to approximately $95,000/day in September, 43% above its 2026 average and 21% above its 5-year average, returning to levels last seen nearly two years earlier.

With extended voyages absorbing vessel capacity, Chinese exporters are also exploring alternative shipping solutions, creating supplementary opportunities for containerships and MPP units. Specialised racking systems allow two to four passenger cars to be secured inside a standard 40-foot container, depending on vehicle dimensions, for shipment through established liner networks. MPP vessels can alternatively carry vehicles on purpose-built flat racks. Illustrating this practice, COSCO arranged three containerised shipments totalling 13,052 vehicles from China to Europe during 2026. Nevertheless, these movements remain marginal, with minimal impact on containership and MPP tonnage demand.

Meanwhile, elevated PCTC earnings and tight vessel availability have prompted a substantial supply-side response. PCTC newbuilding contracts surged to 82 vessels in the first nine months of 2026, against just nine throughout 2025 and a 10-year annual average of 35. Consequently, the orderbook-to-fleet ratio stands at 26%, well above its historical average of 14%, raising concerns over future oversupply. However, with 64% of orderbook tonnage scheduled for delivery from 2028 onwards, much of the capacity expansion remains backloaded, limiting immediate supply pressure. Chinese automakers are also expanding their own shipping fleets, potentially reducing their reliance on the open charter market.

Alongside the anticipated fleet expansion, European trade policy presents a further challenge to the demand outlook. In October 2026, the EU and China reportedly reached a preliminary understanding on proposed restrictions covering Chinese-built conventional and plug-in hybrid vehicles. Under the proposed four-year arrangement, potentially taking effect in December 2026, annual imports would initially be capped at 350,000 units, with the quota increasing by 6% each year, subject to formal implementation. Battery-electric vehicles would remain subject to separate EU anti-subsidy duties. Against projected Chinese hybrid imports of around 800,000 units in 2026, these measures could significantly constrain shipment growth along the China–Europe corridor. The impact on car-mile demand will largely depend on manufacturers' ability to redirect exports to alternative markets or expand overseas production.

Looking ahead, strong Chinese exports and extended voyages should continue to support PCTC earnings in the near term. However, accelerating vessel deliveries from 2028, potential Suez normalisation and growing trade barriers could gradually erode current market tightness. The key question is whether China's export expansion generates additional global car-mile demand or merely displaces shipments from established producing countries. Ultimately, the outlook of the PCTC market will hinge on whether car-mile demand can keep pace with the anticipated fleet expansion.

Tanker Chartering

Crude tanker spot markets displayed mixed trends last week, with VLCC and Aframax rates retreating while Suezmaxes held broadly steady. Slowing cargo enquiry and increasing vessel availability weighed on sentiment across several key regions, although freight levels remained historically elevated. Despite the weaker momentum, the BDTI averaged 7,839, up 2.8% w-o-w.

The VLCC market underwent a correction as subdued cargo enquiry and growing Atlantic tonnage availability exerted downward pressure on freight rates. The Middle East Gulf remained comparatively resilient, while constrained vessel supply provided some support in West Africa despite limited demand. Declining Atlantic returns may discourage westbound ballasting, helping preserve the balance in Eastern tonnage availability. Nevertheless, freight remains historically elevated, suggesting a retreat from recent highs rather than a sustained downturn. VLCC TCEs closed the week at $883,372/day, down 5.7% w-o-w.

The Suezmax market demonstrated greater resilience, with freight rates holding broadly steady despite quieter trading conditions. The Black Sea/CPC emerged as the principal pocket of strength, underpinned by robust demand and limited prompt tonnage.

In West Africa, privately concluded fixtures continued absorbing vessels, leaving availability tight for certain loading dates. US Gulf activity remained sluggish amid the Columbus Day holiday, while suitable tonnage in the Atlantic remained scarce for certain loading dates. Overall, Suezmax TCEs stood marginally above $700,000/day, broadly unchanged w-o-w.

The Aframax market recorded a more pronounced decline, as subdued demand and lengthening tonnage lists strengthened charterers’ bargaining position. The Mediterranean and North Sea came under considerable pressure, with weaker US Gulf demand discouraging transatlantic ballasting and adding to local vessel availability. In the US Gulf, sluggish fixing activity and growing prompt supply further undermined rates, while tepid Asian demand also dampened freight sentiment. Nevertheless, Aframax earnings remained elevated, with upcoming late-October and early-November cargo requirements potentially offering some support. TCE earnings declined 15% w-o-w to $328,345/day.

Dry Chartering

The dry bulk market retreated last week, with losses concentrated in the larger vessel segments. As a result, the BDI averaged 2,675, marking an 11% decline week-on-week.

The Capesize segment underwent a sharp correction, driven by a widening imbalance between cargo demand and vessel supply, compounded by weakness in China's steel sector. Elevated freight costs further challenged the viability of Brazilian iron ore exports. Despite a pickup in South Atlantic fixing activity, rates continued to slide, with northern trades offering little relief. The Pacific remained subdued, although renewed miner participation provided some respite towards the week's close.

The Kamsarmax/Panamax market also softened, with contrasting grain trade dynamics shaping conditions across the two basins. In the Atlantic, slower grain exports from the Americas, coupled with growing tonnage lists, pressured rates despite some activity in mineral trades. The Pacific proved more resilient, benefiting from increased Australian grain shipments and sustained mineral demand. However, easing Australian enquiries towards the close dampened expectations for further gains.

On the Ultramax/Supramax front, performance was uneven, with the main sources of strength concentrated in the Pacific amid firmer Asian demand. North Pacific trading gained momentum, while increased Southeast Asian activity, particularly on routes to India, provided further impetus. In the Atlantic, fading US Gulf demand resulted in a buildup of available tonnage, weighing on rates, whereas South American trades remained stable. Meanwhile, Continental markets eased from recent highs, although renewed Mediterranean activity offered some relief.

The Handysize segment remained broadly stable last week, despite contrasting regional conditions. In the North Pacific and Australia, stronger cargo demand and shorter tonnage lists lent support to rates. Conversely, subdued demand in the US Gulf and southern Pacific left a growing pool of vessels competing for limited employment, putting downward pressure on freight levels. The Continent and Mediterranean maintained a steady footing, while favourable South Atlantic fundamentals continued to underpin rates.