Thomas Zaidman, chief executive of Sagitta Marine SA, says commercial decisions in dry bulk shipping are now more about managing uncertainty than trying to eliminate risk.

For decades, the dry bulk freight market could be understood through a relatively straightforward framework. Freight rates rose and fell with Chinese steel production, agribulk-related seasonality, fleet growth and the broader cycles of global trade. Volatility was part of the business, but it largely reflected those cycles and was, to some degree, predictable.

Today, freight markets are shaped not only by traditional shipping fundamentals, but also by geopolitics, climate disruption, infrastructure bottlenecks and financial market behaviour.

Dry bulk freight rates strengthened significantly in the first half of 2026, supported by resilient Capesize demand and tighter effective vessel supply, rather than stronger cargo growth.

That matters because it means rates are being driven less by a clean read on demand and more by how disruption affects voyage timing and available capacity. In other words, a ship can still be part of the fleet but effectively unavailable if its route is longer, slower or constrained by operational bottlenecks.

The key difference is that freight rates no longer simply reflect cargo demand. Instead, they reflect disruption.

The clearest example is the ongoing geopolitical instability in the Middle East. Although dry bulk cargoes are less directly exposed than container shipping or crude tankers, the security situation in the Red Sea has had profound consequences. Diversions around the Cape of Good Hope have extended voyage durations by thousands of nautical miles, absorbing vessel capacity without a single ship leaving the fleet.

Events at the Panama Canal have reinforced that trend. Water-level restrictions may appear to be a regional operational issue, but they have become a global freight market variable.

This also affects fleet supply. The supply curve will increasingly reflect not only how many ships are built, but also how efficiently they can respond to changing requirements.

The new nature of hedging

For freight risk managers, these developments fundamentally change hedging.

Historically, swaps and options were mainly used to smooth cyclical earnings and manage seasonal exposure. Today they are increasingly being used to manage geopolitical uncertainty itself.

The difficulty is that geopolitical risk cannot be forecast in the same way as Brazilian iron ore exports or US grain harvests. Markets can spend weeks pricing fundamentals calmly before moving several hundred dollars per day within hours after an unexpected military escalation, canal restriction or regulatory announcement.

Greater participation from systematic and algorithmic traders has accelerated this process. News is now incorporated into freight derivative prices almost immediately, reducing the time available for discretionary risk management and often magnifying short-term price moves.

Some observers argue that this makes freight hedging less effective. The opposite case can also be made. Perfect hedging has never existed. What has changed is the objective. The goal is no longer to eliminate risk, but to manage uncertainty well enough that commercial decisions can still be made with confidence.

In a market where geopolitical events routinely dominate pricing, reducing earnings volatility is more valuable than trying to forecast the direction of the market.

Technology may improve forecasting. Providers of artificial intelligence, satellite vessel tracking, AIS data, port congestion analytics and voyage optimisation models all claim to enhance market transparency. But no algorithm can accurately price the probability of the kinds of disruptions described above.

Commercial consequences

Perhaps the most important commercial consequence of this new environment is the gradual evolution of freight contracting.

In some markets, long-term contracts never disappeared. COAs remain essential for miners, utilities and agricultural exporters seeking transport security. However, the broad return of multi-year fixed-rate charters appears increasingly unlikely.

Owners are understandably reluctant to lock in rates when geopolitical shocks can alter earnings within weeks. Charterers are equally unwilling to commit at elevated freight levels when disruptions may disappear as quickly as they appear.

The result has been a shift toward shorter-duration contracts, index-linked pricing and greater use of financial hedging to separate freight risk from physical cargo commitments. The structural change is that freight has become less of a transport cost and more of a tradable financial risk factor.

Looking ahead, there is little reason to expect volatility to fade. Geopolitical tension, climate-induced disruption, environmental regulation and changing commodity flows all point toward structurally tighter and more unpredictable freight markets.

The next decade may be defined less by shipping cycles than by a series of external shocks. The industry therefore faces a choice: it can continue treating volatility as an exception to be endured, or recognize it as the defining characteristic of modern freight markets.

Operators that build sophisticated hedging and flexible commercial strategies into their decision-making will not eliminate uncertainty, but they will be better positioned to profit from it.