Crude tanker one-year time-charter rates rose 176% year on year in October 2026, even as Maritime Strategies International (MSI) forecast a decline in global seaborne cargo volumes for the year. Longer voyages, waiting time and changes in operating efficiency are supporting vessel demand beyond the growth in cargo itself. Meanwhile, a large newbuilding pipeline and expanding shipyard capacity are reshaping the outlook for supply and asset prices.

At the Marine Money China Ship Finance Forum in Shanghai on 3 November, MSI Managing Director Dr Adam Kent examined these competing forces in a presentation titled 'Strong Markets & Persistent Inefficiencies: A Sustainable Combination or Borrowed Time?' His analysis separates the cash flow owners can earn today from the long-term returns available to buyers paying today's vessel prices.

Strong Earnings Despite Weaker Cargo Volumes

Under the forecast presented by MSI, global seaborne cargo volumes will contract in 2026, only the fourth annual decline in more than 40 years. Yet weak cargo growth has not translated into broadly depressed shipping earnings. MSI's comparison of October 2026 with October 2025 shows substantial increases in one-year time-charter rates and secondhand values across several major sectors.

The differences between these measures are significant. In crude tankers, assets available for immediate employment are supported by both strong earning capacity and higher resale values. Existing owners have opportunities to accumulate cash, repay debt or sell vessels. Buyers entering the market face a substantially higher acquisition cost alongside the stronger earnings.

Xinde Marine's 19 October report on Kent's September presentation in Singapore cited a 124% year-on-year increase in crude tanker one-year time-charter rates. The October comparison presented in Shanghai put that increase at 176%. Both snapshots illustrate the intensity of tanker market strength, although they compare different months with their respective year-earlier periods and cannot be used to calculate a month-on-month rate increase.

The longer historical comparison is equally revealing. Current earnings for representative VLCC, Capesize and VLGC benchmarks are close to the high-water marks used in MSI's comparison since 2010. Under MSI's illustrative operating-cost and bank-repayment assumptions, one-year time-charter income for most selected vessel benchmarks also exceeds the combined cash outflow from those two items.

Sector differences remain pronounced. LNG carrier one-year time-charter rates have risen 67% year on year in the comparison, but current earnings remain well below their historical highs. An improving annual growth rate and a relatively weak position within a sector's own cycle can coexist.

Cargo Tonnes, Tonne-Miles and Vessel Demand Are Diverging

One of Kent's most useful comparisons places cargo tonnes, tonne-miles and vessel demand alongside one another. Tonnes measure the amount of cargo moved. Tonne-miles also account for the distance travelled. Vessel demand must additionally reflect factors such as speed, waiting time and operating efficiency. Moving the same cargo over a longer route, or with more waiting, ties up ships for longer.

In MSI's 2026 dry bulk forecast, trade volumes rise by roughly 2%, tonne-miles by around 3.5%, and vessel demand by almost 5%. The divergence is sharper in tankers: the chart shows a fall in trade volumes approaching 10%, a tonne-mile decline of about 6%, and a contraction in vessel demand of less than 1%. These approximate chart readings demonstrate how distance and operating efficiency can materially change the implications of cargo growth for shipping capacity.

The operational examples make the mechanism tangible. In two individual Capesize vessel cases shown by MSI, the Australia-to-China example spent 76% of its time at sea and 4% at anchor. In the West Africa-to-China example, time at sea represented 61%, while time at anchor reached 23%. These are single-vessel examples, rather than averages for the entire trades, but they illustrate how waiting affects vessel productivity.

Route changes can have an equally substantial effect. Kent's presentation used the vessel Desh Ujaala to illustrate a Middle East-to-India diversion involving approximately 6.5 times the direct sailing distance. The case does not describe all trade on that route, but it shows how voyages between the same broad origin and destination can absorb very different amounts of capacity.

The resulting support for the market has conditions attached. Shorter routes, reduced port waiting or faster vessel turnaround would allow the same fleet to perform more transport work, releasing capacity currently absorbed by inefficiencies. Forecasting vessel demand therefore requires an assessment of both cargo growth and the time needed to complete that transport.

This also appears in MSI's 2027 tanker forecast. The model anticipates a substantial rebound in seaborne oil trade, but lower growth in tonne-miles and vessel demand than in cargo tonnes. Trade recovery and improving efficiency can happen together, with the net effect on capacity determined by their combined impact.

Growth Is Shifting Across Cargoes and Routes

Pressure on aggregate seaborne cargo volumes does not imply that every commodity is declining. Kent's dry bulk analysis still contains growing sources of trade, but their composition requires closer examination. The Chinese steel charts show weaker construction-related demand, while manufacturing consumption and net steel exports play a more prominent role. Incremental dry bulk trade also comes from bauxite, grain and minor bulks.

Guinea's importance to incremental bauxite exports, combined with the distance and operational characteristics of West Africa-to-China voyages, gives this trade an influence on Capesize demand beyond the number of tonnes shipped.

MSI's third-quarter analysis, published on 29 September, similarly linked dry bulk vessel demand growing faster than supply in 2026 to market disruptions, and expected firm market balances potentially to continue into 2027. It also identified a significant supply response to higher earnings and asset values. Strong demand conditions and additional vessel investment are developing together.

Container trade shows regional differences too. Using 2012 as the base year, Kent's charts highlight strong volume growth on Far East routes to Africa, Latin America and Oceania. These indices compare each trade with its own starting point and do not establish their relative absolute sizes. They nevertheless show why an assessment of container demand must look beyond the traditional mainlanes.

Weather can amplify the differences between sectors. The presentation examined possible El Nino effects: Panama Canal draught restrictions can increase sailing distances, and reduced hydropower output can create additional coal demand. Lower crop yields, warmer Asian winters and reduced Southeast Asian palm oil production can affect the relevant dry bulk, LNG and chemical trades. The consequences depend on the specific commodity and route.

The Ordering Boom Moves Towards a Delivery Peak

Strong earnings continue to encourage investment. In MSI's annual contracting chart, full-year 2026 newbuilding orders are projected to approach 170 million GT, a scale comparable with the previous shipbuilding boom. The figure combines contracts already placed with MSI's forecast for the remainder of the year.

MSI compared the six-year periods of 2003-2008 and 2021-2026, together with the associated delivery profiles. Both involve substantial investment that will ultimately become operating capacity. Today's fleet size, age profile and sector-specific orderbooks, however, differ from those of the earlier cycle.

On the gross-tonnage basis used in this presentation, the overall orderbook is equivalent to roughly 20% of the fleet, below the earlier peak of around 40%. The aggregate conceals significant variation: the ratios shown are approximately 13% for bulk carriers, 27% for crude tankers, 37% for containerships and 39% for LNG carriers. The supply implications need to be assessed sector by sector.

Timing also matters. MSI's charts place a large volume of deliveries in 2027-2029, with particular concentration around 2028. Its containership forecast shows deliveries approaching 4.8 million TEU in 2028. Even after the assumed recycling, fleet growth remains approximately 11%. Those are scenario-based forecasts, but they indicate the scale of capacity that the market may need to absorb.

Fleet renewal can absorb part of the newbuilding programme, but rebalancing also requires vessels to leave service. Whether older ships are retired depends on their earnings, maintenance requirements and the economics of continued operation. MSI assumes substantially higher recycling in later years. If actual demolition falls short of those assumptions, net fleet growth could exceed the forecast.

Assessing whether the present orderbook can be absorbed therefore requires more than an orderbook-to-fleet ratio. Delivery schedules, potential recycling and future vessel demand must be considered together, particularly while profitable older ships continue trading and replacement needs have yet to become actual retirements.

China's Capacity Expansion Changes Future Pricing Conditions

The evolution of Chinese shipbuilding capacity is another major part of Kent's supply analysis. His comparison of national orderbooks from end-2023 to September 2026 shows substantial growth in China. The effective-capacity chart also identifies China as a major contributor to the recovery and expansion of global shipbuilding capacity.

The expansion includes new entrants, reactivated facilities and larger existing production bases. MSI's yard and yard-group count shows a clear recovery in the number of Chinese participants taking orders, although the total remains below the level around 2008. Satellite imagery comparing the former STX Dalian footprint with Hengli Heavy Industry's expanded site illustrates the growth of a large shipbuilding base.

The distinction between yard numbers, physical footprint and effective output is important. Actual capacity depends on production organisation and delivery performance. Nevertheless, as more facilities can consistently accept and execute orders, the availability of building slots changes. Existing backlogs support current production, while the flow of subsequent orders determines how fully the enlarged capacity remains employed and influences future quotations.

In a separate shipbuilding analysis published on 27 October, MSI also highlighted high owner profitability alongside weaker trade growth. It suggested leading yards could retain stronger positions in a downturn, with facilities converted from offshore work and some coastal participants more exposed. Order quality, execution and pricing power can differ considerably within an expanding industry.

MSI's newbuilding price forecast in Kent's presentation points to a retreat from current high levels. The charts cover representative VLGCs, 8,000-TEU containerships, Capesizes and MR tankers, with more pronounced adjustments in some curves in 2028. Healthy current yard profitability can coexist with softer future prices: existing contracts support present business, while new orders will be negotiated under the market conditions prevailing at that time.

Strong Earnings and Attractive Purchase Prices Are Separate Questions

Kent's presentation does not suggest that shipping as a whole is about to lose its earning capacity. In MSI's forecasts for the next few years, one-year time-charter rates for several vessel types remain above their averages in the 2010s. Supported operating earnings and a correction in asset values can occur at the same time.

The secondhand outlook follows a similar pattern. MSI expects average 2028 prices for several five-year-old vessel types to be below current levels, while many remain relatively high against their historical ranges. Ships may continue generating good cash flow for existing owners, but a higher entry price changes the investment return available from the same operating income.

The comparison between market values and discounted cash flow makes the issue more explicit. MSI contrasts the market valuation of vessels covered by its SEASCAPE platform with DCF values calculated using its own forecasts for earnings, operating costs and future vessel values. In the dry bulk and oil tanker samples, market values are materially higher than modelled DCF values. The chart describes the covered portfolios, rather than delivering the same valuation conclusion for every individual ship.

From a valuation perspective, the gap suggests buyers may be accepting lower prospective returns, or using more optimistic earnings and residual-value assumptions than MSI's model. Either position requires a view on how long high charter rates can last, how much new capacity will arrive, and how much vessel availability could be released by changes in routes and operating efficiency.

Kent's question about strong markets and persistent inefficiencies ultimately comes back to these measurable variables. Today's cash generation and disposal opportunities matter to owners. So do the voyage distances, waiting times, deliveries and retirements that will shape the performance of investments over the coming years.

If cargo volumes recover while transport efficiency improves, part of the additional demand for ships can be offset. If that coincides with concentrated newbuilding deliveries, elevated charter rates and vessel prices will need further support. The most informative measures will be how far each tonne travels, how much vessel time it consumes, and whether the resulting demand can keep pace with new capacity entering service.

Sources

Charts: Maritime Strategies International, Dr Adam Kent, Strong Markets & Persistent Inefficiencies: A Sustainable Combination or Borrowed Time?, Marine Money China Ship Finance Forum, Shanghai, 3 November 2026. Original chart credits are retained.

Background references: Xinde Marine, 19 October 2026: Kent's September market presentation; MSI, 29 September 2026: dry bulk outlook into 2027; MSI, 27 October 2026: China's shipbuilding capacity.