10-Q: Amplify Commodity Trust Reports Strong Q3 2025 Gains

Amplify Commodity Trust's BDRY and BWET ETFs delivered significant positive returns in Q3 2025, driven by rising dry bulk and crude tanker spot rates.

Summary

• Amplify Commodity Trust reported a combined net income of $22,451,606 for the three months ended September 30, 2025, a significant improvement from a net loss of $(4,554,896) in the same period last year.
• The Breakwave Dry Bulk Shipping ETF (BDRY) saw its net asset value (NAV) per share increase by 35.37% to $7.61, and its market value per share increase by 35.32% to $7.51 during the quarter.
• BDRY recorded a net income of $21,936,582, driven by $22,086,958 in net realized gains on futures contracts.
• The Breakwave Tanker Shipping ETF (BWET) experienced a 37.74% increase in NAV per share to $14.64 and a 38.52% increase in market value per share to $14.75.
• BWET reported a net income of $515,024, with $305,479 in net realized gains and $217,097 in unrealized gains on futures contracts.
• Dry bulk spot rates, as measured by the Baltic Dry Index, increased by approximately 43% during the quarter, reaching their best level since early 2024, fueled by strong iron ore and bauxite demand.
• Crude tanker spot rates for Very Large Crude Carriers (VLCC) improved by about 30%, ending the quarter at a five-year high for the time of year.
• Both ETFs maintain expense caps of 3.50% through December 31, 2025, with the Commodity Trading Advisor (CTA) waiving fees and the Sponsor absorbing expenses to meet this limit.

Sentiment

Score: 8

Explanation: The Trust reported a significant turnaround to net income, with both BDRY and BWET ETFs delivering strong double-digit positive returns driven by robust increases in dry bulk and crude tanker spot rates. While geopolitical and economic uncertainties persist, the current market conditions for shipping freight futures are highly favorable.

Positives

• Combined net income for the three months ended September 30, 2025, was $22,451,606, a substantial turnaround from a net loss of $(4,554,896) in the prior year period.
• BDRY achieved a total return of 35.37% at Net Asset Value and 35.32% at Market Value for the quarter ended September 30, 2025.
• BWET achieved an even stronger total return of 37.74% at Net Asset Value and 38.52% at Market Value for the quarter ended September 30, 2025.
• Dry bulk spot rates, as indicated by the Baltic Dry Index, surged by approximately 43% during the quarter, reaching the best level since early 2024.
• Strong demand for iron ore transportation from Brazil to China reached its highest level ever for the quarter, supported by solid bauxite volumes out of West Africa.
• Crude tanker spot rates for Very Large Crude Carriers (VLCC) improved by about 30% during the period, ending the quarter at the highest level for the time of year in at least five years.
• The crude tanker orderbook remains historically low, aiding the overall projected market balance, despite a steady increase from summer 2023 lows.
• OPEC+ is gradually increasing oil supply, which is expected to continue supporting spot VLCC rates and boosting fleet utilization.

Negatives

• BDRY experienced a net decrease in Net Assets from share transactions of $(49,301,252) for the three months ended September 30, 2025, primarily due to the redemption of 8,300,000 shares.
• Despite overall net income, both BDRY and BWET recorded a net investment loss of $(86,846) and $(7,552) respectively, for the three months ended September 30, 2025, indicating that operational expenses exceeded investment income.
• The Chinese economy continues to grow at relatively weak rates compared to recent years, and the domestic real estate market remains subdued, limiting demand for new construction and steel products.
• Coal volumes and prices have declined considerably compared to the recent past due to slower growth from China and India.
• BWET is subject to potential future repayments of $898,715 to Breakwave for previously waived CTA fees, which could impact future profitability if recouped.

Risks

• Investment Related Risk: The NAV of shares relates directly to the value of the respective freight futures portfolio, cash, and cash equivalents, making it susceptible to fluctuations in asset prices.
• Volatility of Charter Rates: Charter rates for dry bulk vessels and crude oil tankers are volatile and have declined significantly from historic highs, with potential for further decreases.
• 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 independent of the freight futures price level.
• Geopolitical Risk (Russia-Ukraine War): The conflict poses risks to global economic growth, impacts oil and gas prices, and has led to inflationary pressures. Reduced grain, coal, and iron ore exports from the region negatively affect dry bulk demand and rates, while sanctions have reshuffled tanker trade patterns, increasing volatility.
• Geopolitical Risk (Hamas-Israel Conflict): This conflict has stoked fears of oil supply instability in the Middle East and globally. Escalation or expansion could negatively impact oil prices and demand for freight, affecting spot rates for both dry bulk and liquid freight.
• Trade Policy Risk (Tariffs): Recent announcements of tariffs on import goods by the US and other countries could significantly reduce trade volumes, leading to lower shipping rates for both dry bulk and tanker segments.
• China Economic Risk: China accounts for a sizable part of oil demand, and changes in its economic and political environment or government policies may materially adversely affect tanker charter rates and Freight Futures.
• Liquidity Risk: Disruptions in orderly markets for futures contracts or financial instruments could prevent the Funds from quickly disposing of holdings at desired prices, especially with large positions or limited buy/sell orders.
• Natural Disaster/Epidemic Risk: Events like earthquakes, fires, floods, hurricanes, and widespread diseases (e.g., COVID-19) can disrupt economies and markets, increase volatility, cause significant losses, affect supply chains, and hinder the Funds' ability to achieve investment objectives.

Future Outlook

For dry bulk, the company anticipates entering a seasonally strong calendar year fourth quarter, but notes that trade tensions remain high, posing a risk of adverse impact on global trade and shipping rates. For crude tankers, OPEC+ is gradually increasing supply, which is expected to continue supporting spot VLCC rates and boosting fleet utilization. The historically low crude tanker orderbook, despite recent increases, is expected to aid overall market balance. The company also highlights that geopolitical turmoil, such as the Israel-Hamas conflict, is likely to continue reshaping routing patterns and introducing disruptions across shipping segments, though the direct effect on crude tanker VLCCs has been modest so far.

Management Comments

• The Chinese economy continues to grow at relatively weak rates versus recent years while the domestic real estate market remains subdued, limiting demand for new construction and thus demand for steel products.
• As we enter the seasonally strong calendar year fourth quarter, trade tensions remain high and could lead to some potentially negative outcomes for global trade. A lot of uncertainty remains around trade policies and the effect on trade, and thus the risk of adverse impact on shipping remains elevated.
• Geopolitical turmoil continues to have a material impact on global shipping. The Israel-Hamas conflict and related attacks on vessels in the Red Sea are likely to continue reshaping routing patterns, potentially extending voyage durations and introducing broad-based disruptions across all shipping segments.
• China remains the principal source of demand growth for crude oil, and consequently for crude tanker demand. Nonetheless, slower oil import growth and weaker domestic demand in China pose material downside risks to tanker rates.
• Looking ahead, OPEC+ is gradually increasing supply, which has supported spot VLCC rates. This trend is likely to persist, as a sizable volume of oil remains available on the world market, boosting fleet utilization.

Industry Context

The shipping industry, particularly dry bulk and crude oil tankers, experienced significant rate increases in Q3 2025, driven by specific demand factors (iron ore, bauxite) and supply-side dynamics (low tanker orderbook). Geopolitical events, such as the Russia-Ukraine war and the Israel-Hamas conflict, are identified as major influences, causing trade pattern reshuffling, increased volatility, and potential supply instability, though their direct impact varies across segments. China's economic health remains a critical factor, with its subdued real estate market and slower growth posing downside risks to commodity demand, while its crude stockpiling activities continue to support tanker demand. Global trade tensions and tariffs are noted as ongoing concerns that could negatively affect overall trade volumes and, consequently, shipping rates.

Comparison to Industry Standards

• BDRY is highlighted as the only Freight futures ETF globally, providing unique exposure to dry bulk freight futures.
• BWET is also noted as the only Freight futures ETF globally, offering unique exposure to crude oil tanker freight futures.
• The performance of BDRY and BWET is directly tied to the Baltic Exchange's Capesize, Panamax, Supramax (for BDRY) and TD3C, TD20 (for BWET) indices, which measure charter rates for shipping.
• The ETFs' tracking performance against their respective benchmark portfolios is influenced by factors such as settlement prices vs. closing share prices, roll methodology differences, trading commissions (10bps of nominal value for BDRY, $0.04 per ton for BWET), clearing fees ($12 per lot for BDRY, $8 per lot for BWET), and management fees.

Management Changes

Corporate Governance

Legal Proceedings

• The Funds are currently not a party to any pending legal proceedings, although they may be involved in litigation arising out of operations in the normal course of business.

Related Party Transactions

• The Funds pay the Sponsor a management fee (Sponsor Fee) and Breakwave (CTA) a license and service fee (CTA Fee).
• Breakwave has agreed to waive its CTA fee, and the Sponsor has agreed to absorb remaining 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.
• For the three months ended September 30, 2025, the CTA fee waiver for BDRY was $0, and for BWET was $6,137.
• For the three months ended September 30, 2025, expenses absorbed by the Sponsor for BWET aggregated $88,678.
• BWET is subject to potential future repayments of $898,715 to Breakwave for waived CTA fees, with amounts expiring between June 30, 2026, and June 30, 2029.

Stakeholder Impact

• Shareholders of BDRY and BWET experienced significant positive returns in Q3 2025 due to favorable market conditions in dry bulk and crude tanker shipping.
• The Sponsor and Breakwave continue to manage expenses through fee waivers and expense absorption, benefiting shareholders by maintaining expense caps.
• Potential future repayments to Breakwave for waived CTA fees could impact BWET's net assets in future periods, affecting shareholders.

Next Steps

• The BDRY and BWET Benchmark Portfolios will be rebalanced annually.
• The Sponsor and Breakwave's contractual expense caps for BDRY and BWET are set to expire on December 31, 2025, which could impact future expense ratios if not renewed.

Key Dates

Keywords

ETF, commodity, dry bulk shipping, tanker shipping, freight futures, BDRY, BWET, Amplify Commodity Trust, SEC filing, Q3 2025, Baltic Dry Index, VLCC rates, geopolitical risk, market performance