For Ship Operators, Volatility is Opportunity
Volatility fuels freight markets—and in 2024, there wasn’t much fuel in the tank.
The Baltic Dry Index (BDI), a benchmark for global dry bulk freight rates, offers a clear read on market volatility.
2022 Dry Bulk Freight Rates: High 3,369 / Low 965 → Range: 2,404
2023 Dry Bulk Freight Rates: High 3,346 / Low 530 → Range: 2,816
2024 Dry Bulk Freight Rates: High 2,419 / Low 976 → Range: 1,443
As the range of market moves decline, so do the number of opportunities for freight traders to identify and capitalize on market dislocations.
The muted volatility in 2024 was a severe headwind to the profits of vessel operators reliant on trading freight exposure, rather than owning ships, like the Freight Services & Trading division at leading global shipping company D/S Norden.
D/S Norden 2022 Results: Net profit USD 550 million
D/S Norden 2023 Results: Net profit of USD 133 million
D/S Norden 2024 Results: Net loss of USD 74 million
Freight trading companies operate like commodity traders—positioning, arbitraging, and capitalizing on volatility. When rates have a wide range, the upside is real, as can be seen in D/S Norden’s 2022 and 2023 results. 2024, on the other hand, was a year that most vessel operators would like to forget, with SwissMarine, Costamare Bulkers, and Western Bulk also posting annual losses.
In the zero-sum game of shipping, someone else benefited from these operators' losses in 2024: ship owners. Ship owners were effectively overpaid by operators, who misread the market and absorbed the downside.
Operators, unlike traditional shipowners, don't benefit from asset value appreciation. Operators’ returns are tied exclusively to movement in freight rates.
