Shipping costs soar by 467%! Geopolitical conflicts and sanctions are upending the global bulk shipping landscape.

From energy to bulk commodities such as bulk minerals, global shipping rates are experiencing an extremely rare year-end surge, with ongoing geopolitical conflicts, Western sanctions, and increasing production disrupting global shipping supply routes. The sudden surge in year-end shipping rates highlights that demand has not "hibernated" as expected, but instead has been pushed upwards by AI infrastructure, energy, and bulk commodities making a comeback. On the supply side, geopolitical conflicts and sanctions have artificially constrained supply, with effective capacity being stretched and locked in. In an industry where short-term capacity is essentially fixed, the end result is sudden skyrocketing prices. Daily earnings for ships transporting huge crude oil products on key global routes have seen the largest increase this year, rising by 467% from the beginning of the year to the end of November. Rates for transporting liquefied natural gas and commodities like iron ore have also increased by over four times and two times respectively. Due to a usual seasonal weakening of demand in shipping, freight costs typically significantly decrease at the end of the year. The longer time it takes for ships to transport goods at sea has significantly contributed to this surge, with many senior executives in the shipping industry predicting that the tight market conditions will continue at least until early next year. The graph above shows that global shipping markets have not been this optimistic for quite some time, with significant price increases for key vessel types on major global routes throughout the year 2025. This reflects the cumulative increase in daily freight rates (equivalent period hire) for key crude oil routes from the beginning of the year to the end of November. "We are seeing an old-fashioned and extremely tight capacity physical logistics market," said Lars Barstad, CEO of Frontline Management AS, which operates an oil tanker fleet that includes Very Large Crude Carriers, during a performance conference call late last month. "We have not seen any signs of weakness." For giant crude oil tankers, the increase in production in the Middle East and U.S. sanctions on two Russian oil giants with significant influence in the global energy sector have led to an increase in demand for their oil in Asia, driving up rates for these large vessels. Meanwhile, costs for transporting liquefied natural gas from the U.S. to Europe have recently reached their highest levels in two years due to the increase in use of vessels for new large projects in North America. The benchmark index for ships carrying bulk commodities such as grain and ore reached a 20-month high at the end of November, fueled by expectations of the commissioning of a large iron ore project in Guinea and potential weather-related delays near China that could further tighten supply. Looking more broadly, increasing conflicts near key shipping routes have also contributed to the overall increase in costs. Attacks by Houthi rebels in Yemen, supported by Iran, on commercial ships in the Red Sea have forced some vessels to detour around Africa, increasing demand for the key indicator "ton-miles" which multiplies the volume of goods being shipped by the distance traveled, indicating that goods are being transported over longer distances than usual. Amid geopolitical turmoil, the same global fleet that used to complete 10 laps in a year may now only be able to do 8, essentially reducing the effective capacity. In an industry where few new ships are being added in the short term, this slowdown in turnover is a hidden production cut, and serves as a strong amplifier for freight rates. Although actual shipping costs have slightly fallen from their peak at the end of November, the high and substantial transportation costs continue to have a positive impact on the entire shipping market. Large U.S. liquefied natural gas buyers have considered delaying shipments, while some tanker owners seek to maximize profits. In recent weeks, operators of Very Large Crude Carriers have been opting for longer voyages to lock in higher profits, forcing some Indian refinery owners to use two smaller tankers instead of the usual one to ensure timely return of their Middle East crude oil purchases, according to shipbrokers. However, despite enjoying this rare prosperity after years of dismal profit data, many shipping companies remain cautious in fleet renewal or making significant strategic decisions. New ship prices are high, and with the addition of new vessels and the potential reopening of the Red Sea, rates may experience a significant decline. "If you're a ship owner, you've made money, you're not under pressure," said Jayendu Krishna, director of Drewry Maritime Services. "But you're not going to throw a party either," because the outlook for the entire shipping industry remains uncertain, factors that disrupt rates can change at any time, he added. Some senior analysts have pointed out that the core logic behind the surge in year-end freight rates is not just a simple "shipping peak season + market speculation." It is the combination of resilient energy and bulk demand in the era of AI, coupled with sanctions and conflicts reshaping global trade routes, significantly longer routes, and the slowdown in ship turnover due to geopolitical risks and extreme weather factors. In an industry where short-term capacity expansion is difficult and ship owners are unwilling to build new ships, this structure of "strong demand + reduced effective supply + longer routes" has led to a rare, almost "run on the bank"-like surge in freight rates at the year-end.