10-K: Amplify Commodity Trust 2025 Annual Report: Shipping ETFs Face Steep Declines

Amplify Commodity Trust's 2025 annual report reveals significant net asset value declines for its Dry Bulk and Tanker Shipping ETFs amid challenging market conditions and geopolitical disruptions.

Summary

• Amplify Commodity Trust, comprising Breakwave Dry Bulk Shipping ETF (BDRY) and Breakwave Tanker Shipping ETF (BWET), reported significant declines in net asset value (NAV) and market value per share for the fiscal year ended June 30, 2025.
• BDRY's NAV per share decreased by 53.62% to $5.63, and its market value per share decreased by 54.66% to $5.55 for the year ended June 30, 2025.
• BWET's NAV per share decreased by 36.30% to $10.63, and its market value per share decreased by 36.60% to $10.64 for the year ended June 30, 2025.
• BDRY recorded a net loss of $16,470,513 for the year ended June 30, 2025, primarily due to net realized losses on futures contracts of $15,925,057.
• BWET recorded a net loss of $1,028,257 for the year ended June 30, 2025, mainly from net realized losses on futures contracts of $1,053,410.
• Dry bulk spot rates declined, with the Baltic Dry Index (BDI) averaging 1,475 in FY2025, down from 1,730 in FY2024.
• Crude tanker spot rates experienced low volatility, but weak Chinese demand and geopolitical events continued to impact the market.
• Both Funds maintain an expense cap of 3.50% (excluding brokerage commissions, interest expense, and extraordinary expenses) through December 31, 2025, with the Sponsor and Breakwave waiving/assuming fees to meet this cap.
• BWET is subject to potential future repayments of $803,901 to Breakwave for waived CTA fees, with expirations between June 30, 2026, and June 30, 2028.
• As of September 1, 2025, BDRY had 5,475,040 outstanding shares and BWET had 125,100 outstanding shares.

Sentiment

Score: 3

Explanation: Both ETFs experienced significant declines in NAV and market value, coupled with net losses, driven by challenging dry bulk and tanker shipping market conditions and geopolitical factors. While expense caps provide some stability, the overall financial performance is poor and the outlook remains uncertain due to ongoing global disruptions.

Positives

• The Sponsor and Commodity Trading Advisor (Breakwave) have contractually agreed to cap Fund expenses at 3.50% through December 31, 2025, absorbing costs to protect investors from higher expense ratios.
• BDRY experienced a net increase of 8,475,000 shares from share transactions for the year ended June 30, 2025, indicating continued investor participation despite market conditions.
• The crude tanker orderbook for the next few years remains historically low, with very few new vessel deliveries, which is expected to aid the overall projected market balance for BWET.
• Increasing rains during spring and early summer led to a gradual increase in daily transits through the Panama Canal, approaching normal levels by the end of the period, easing previous supply pressures for dry bulk shipping.
• BDRY earned $1,403,394 in interest income for the year ended June 30, 2025, and BWET earned $66,831 in interest income for the same period.

Negatives

• BDRY's Net Asset Value per share decreased by 53.62% and its market value per share by 54.66% for the year ended June 30, 2025.
• BWET's Net Asset Value per share decreased by 36.30% and its market value per share by 36.60% for the year ended June 30, 2025.
• BDRY reported a net loss of $16,470,513 for FY2025, a significant reversal from a net income of $46,770,200 in FY2024.
• BWET reported a net loss of $1,028,257 for FY2025, an increase from a net loss of $318,928 in FY2024.
• Dry bulk spot rates declined, with the Baltic Dry Index (BDI) averaging 1,475 in FY2025, down from 1,730 in the previous year.
• Geopolitical turmoil, including the Israel-Hamas conflict and Red Sea attacks, rearranged shipping routes, lengthening trips and causing disruptions, although the impact was milder than the previous year.
• Low water levels in the Panama Canal decreased daily vessel transits for most of the year, further pressuring the global supply of ships.
• Iron ore trade volumes were slightly weaker due to subdued steel demand in China's fragile real estate sector.
• Coal trading volumes declined due to better solar and wind power generation and lower domestic coal prices in China.
• Chinese oil imports declined for a second consecutive year, impacting tanker rates.
• BWET is subject to potential future repayments of $803,901 to Breakwave for waived CTA fees, which could impact future profitability.

Risks

• Investment Related Risk: The NAV of each Fund's shares directly relates to the value of its freight futures portfolio, cash, and cash equivalents, and fluctuations in these asset prices could materially adversely affect values and performance.
• Past performance is not necessarily indicative of future results; all or substantially all of an investment in BDRY or BWET could be lost.
• Volatile Charter Rates: Charter rates for dry bulk vessels and crude oil tankers are volatile and have declined significantly, potentially remaining at low levels or decreasing further.
• Negative Roll Risk: Futures and options contracts have expiration dates, and replacement contracts may be priced higher or have less favorable terms, leading to losses (negative roll cost) independent of freight futures price levels.
• Inflation: Inflation in wages, materials, energy costs, equipment, and other costs has the potential to adversely affect the Funds' results, cash flows, and financial position, particularly if commensurate price increases are not achieved. Higher U.S. inflation could also lead to higher borrowing costs, supply shortages, and weaker exchange rates.
• Geopolitical Risk (Russia-Ukraine War): The conflict poses risks for global economic growth, impacting oil and gas prices, and disrupting grain, coal, and iron ore exports, potentially leading to significantly lower dry bulk freight rates and a decline in BDRY's value. Sanctions against Russia have reshuffled tanker trade patterns and increased volatility.
• Geopolitical Risk (Hamas-Israel Conflict): Stoked fears of oil supply instability; escalation or expansion of hostilities, interventions by other groups or nations, economic sanctions, or disruption of shipping transit in key routes (e.g., Straits of Hormuz) could lead to oil supply instability, negatively impacting spot freight rates and Freight Futures.
• Tariff Risk: U.S. government tariffs and corresponding increases by other countries can have a meaningful negative impact on trade volumes, potentially decreasing demand for transportation and leading to lower shipping rates for both dry bulk and tanker segments.
• China Economic and Political Environment: China accounts for a sizable part of oil demand, and changes in its economic and political environment and government policies may have a material adverse effect on tanker charter rates and Freight Futures.
• Liquidity Risk: Disruption of orderly markets for futures contracts or financial instruments could prevent the Funds from promptly liquidating certain holdings at desired prices. Daily limits on futures contract prices can also prevent liquidation, and the large size of positions increases illiquidity risk.
• Natural Disaster/Epidemic Risk: Natural or environmental disasters and widespread diseases can be highly disruptive to economies and markets, leading to increased volatility, significant market losses, supply chain disruptions, and difficulty in achieving investment objectives.
• Counterparty Risk: The Funds are exposed to the credit risk that a counterparty (clearinghouse or its members) will not be able to meet its obligations, despite general guarantees.
• Expense Cap Expiration: The contractual expense cap and CTA fee waiver expire on December 31, 2025. If not renewed, the Funds could be adversely impacted, including their ability to achieve their investment objectives.

Future Outlook

Additional OPEC+ production increases planned in the next few months are expected to increase demand for crude tankers, all else being equal. The crude tanker orderbook for the next few years remains historically low, with very few new vessel deliveries, which is aiding the overall projected market balance. The contractual expense cap and CTA fee waiver for both Funds are set to expire on December 31, 2025, and if not renewed, the Funds could be adversely impacted in their ability to achieve investment objectives.

Management Comments

• Amplify Commodity Trust's forward-looking statements are not guarantees of future results and conditions, and important factors, risks and uncertainties may cause actual results to differ materially from those expressed in forward-looking statements. Investors should not place undue reliance on any forward-looking statements.

Industry Context

The dry bulk shipping market experienced a decline in spot rates during the year ended June 30, 2025, with the Baltic Dry Index (BDI) falling. This was influenced by geopolitical turmoil (Israel-Hamas conflict, Red Sea attacks) which lengthened shipping routes, low water levels in the Panama Canal, and weaker Chinese demand for iron ore and coal due to a fragile real estate sector. The crude tanker shipping market saw low volatility in spot rates, but was also affected by geopolitical events and a second consecutive year of declining Chinese oil imports. Despite these challenges, the historically low crude tanker orderbook suggests a potential for improved market balance in the future. Both segments are sensitive to global economic growth, trade volumes, and geopolitical stability.

Comparison to Industry Standards

• BDRY's performance is compared to a 'frictionless' BDRY Benchmark Portfolio, with noted differences primarily due to actual fees, real minimum lot sizes for transactions (5 lots minimum), prevailing transaction prices versus daily settlement prices, trading commissions (10bps of nominal value per transaction), clearing fees (approximately $12 per lot), and management fees.
• BWET's performance is compared to a 'frictionless' BWET Benchmark Portfolio, with similar differences attributed to actual fees, real minimum lot sizes for transactions (5 lots minimum), prevailing transaction prices versus daily settlement prices, trading commissions ($0.04 per ton per transaction), clearing fees (approximately $7 per lot), and management fees.
• The Baltic Dry Index (BDI), a benchmark for dry bulk spot rates, averaged 1,475 for the year ended June 30, 2025, a decrease from 1,730 in the previous year, indicating a weaker market for dry bulk shipping.
• Crude tanker spot rates for Very Large Crude Carriers (VLCC) remained relatively steady, but Chinese oil imports declined for a second year in a row, which is a concern for tanker demand growth.
• The crude tanker orderbook remains historically low, which is a positive indicator for future market supply-demand balance compared to historical fleet growth rates.

Corporate Governance

Related Party Transactions

• The Funds pay Amplify Investments LLC (the Sponsor) a management fee (BDRY: greater of 0.15% of average daily net assets or $125,000 annually; BWET: greater of 0.30% of average daily net assets or $50,000 annually).
• The Funds pay Breakwave Advisors LLC (the CTA) a license and service fee (1.45% of average daily net assets for both Funds).
• The Sponsor and Breakwave have contractually agreed to waive/assume expenses to ensure Fund expenses do not exceed an annual rate of 3.50% (excluding brokerage commissions, interest expense, and extraordinary expenses) through December 31, 2025.
• BWET is subject to potential future repayments of $803,901 to Breakwave for waived CTA fees, expiring between June 30, 2026, and June 30, 2028.
• The Sponsor provides Principal Financial Officer, Chief Compliance Officer, Regulatory Reporting, Legal, and Wholesale Support services to the Funds, receiving fees for each (e.g., $24,904 for PFO/CCO, $25,002 for Regulatory Reporting, $45,000 for Legal, $73,621 for BDRY Wholesale Support, $17,808 for BWET Wholesale Support for FY2025).
• Foreside Fund Services, LLC (Distributor) provides marketing services to the Funds for an annual fee (minimum $10,000 annually), incurring $6,145 for BDRY and $513 for BWET in FY2025.
• U.S. Bank (Administrator, Custodian, Fund Accountant, Transfer Agent) receives fees from each Fund (0.05% of AUM with $45,000 minimum for admin/accounting/transfer agent; 0.01% of AUM with $4,800 minimum for custody).

Stakeholder Impact

• Shareholders: Experienced significant negative returns on their investments in both BDRY and BWET, with substantial declines in NAV and market value. They benefit from the expense caps but are exposed to high market and geopolitical risks.
• Sponsor (Amplify Investments LLC): Continues to manage the Trust and Funds, receiving management and service fees, but also assumes expenses to maintain the expense cap, impacting its profitability.
• Commodity Trading Advisor (Breakwave Advisors LLC): Receives CTA fees but waives a portion to meet expense caps. Has potential future recoupment rights for waived fees from BWET, representing a future financial consideration.
• Service Providers (U.S. Bank, Foreside Fund Services, Marex Financial): Continue to receive fees for their administrative, custody, distribution, and brokerage services, maintaining their revenue streams from the Funds.

Next Steps

• The Sponsor and Breakwave's contractual expense cap and CTA fee waiver are set to expire on December 31, 2025, which will require a decision on renewal or potential impact on Fund expenses.
• BWET has potential future repayments of waived CTA fees to Breakwave, with amounts of $80,669, $333,888, and $389,344 expiring during the years ending June 30, 2026, 2027, and 2028, respectively.
• Monitoring the impact of planned OPEC+ production increases on crude tanker demand in the coming months.
• Continued monitoring of geopolitical developments (e.g., Israel-Hamas conflict, Red Sea attacks, Russia-Ukraine war) and their effects on global shipping routes, trade volumes, and freight rates.
• Observing the Chinese economy's recovery, particularly in the real estate sector and its impact on iron ore and coal demand, as well as oil imports.

Key Dates

Recommendation

The significant declines in Net Asset Value and market price for both BDRY (-53.62% NAV, -54.66% market value) and BWET (-36.30% NAV, -36.60% market value) for the year ended June 30, 2025, indicate substantial underperformance. Both funds reported net losses, reversing BDRY's prior year's gains. The underlying dry bulk and tanker shipping markets face persistent headwinds from geopolitical turmoil, weak Chinese demand, and other macroeconomic factors. While expense caps offer some protection, the overall trend is negative, and the potential for future CTA fee repayments for BWET adds another layer of financial obligation. Given the poor performance and ongoing market challenges, a seasoned investor would likely recommend selling these ETFs to mitigate further losses.

Keywords

Dry Bulk Shipping, Tanker Shipping, Freight Futures, ETF, Commodity Pool, BDRY, BWET, Amplify Commodity Trust, SEC Filing, 10-K, Financial Report, Shipping Rates, Geopolitical Risk, Market Volatility, Futures Contracts, Investment Performance, Net Asset Value, Expense Ratio, Breakwave Advisors, Baltic Dry Index, Crude Oil Tankers, Capesize, Panamax, Supramax, TD3C, TD20