For the first half of July, the container market risked compounding on the fundamentals of growing capacity and capitulating demand, which was largely reflective of ongoing trends rather than anything dramatically new. Despite this, container markets have not been short of dramatic headlines as the remainder of the equities and commodities market wake up to a ‘freight recession’. Most of this comes as very little surprise to those in the container business, with the rest of the world reacting to abysmal financial reporting from container liners that have shed much of their Covid foothold on rates, relying more on war chests of earnings accrued over the past three years. 

 Maersk rate increases peg the 40ft dry container price at around $1,900, which falls just shy of the FBX11 China/East Asia to North Europe Q3’23 trading level of $2,050/FEU. This ties futures prices directly back to the physical market, highlighting the value of hedging via futures.

Price action has been driven less by fundamental shifts and more by carrier attempts to manage capacity and ratchet up short-term spot rates. The big news comes in two parts: firstly, the attempts by Maersk and CMA CGM (announced in mid-July) to implement rate increases across the board on the Asia-Europe trade – with direct impacts on physical spot prices and futures for August and September. Maersk rate increases peg the 40ft dry container price at around $1,900, which falls just shy of the FBX11 China/East Asia to North Europe Q3’23 trading level of $2,050/FEU. This ties futures prices directly back to the physical market, highlighting the value of hedging via futures.

General Rate Increases have clearly had an impact, with FBX11 China/East Asia to North Europe spot prices jumping 37.01% in one day on the back of new rate validities on 1 August. This was versus a fairly flat futures price, which as arguably already priced in GRIs, with FBX11 Q4’23 actually decreasing $25 from 23 May 2023 to 31 July 2023.

Secondly, the shift of capacity away from weaker transpacific trades and on to Asia-Mediterranean and Asia-Europe trades is indicative of another attempt at capacity management by some of the larger liners. The troubles currently being endured by smaller liners who have since pulled out of the trade highlight the changeable nature of demand and spot prices, which have, up until the end of July, been largely flat and motionless. General Rate Increases have clearly had an impact, with FBX11 China/East Asia to North Europe spot prices jumping 37.01% in one day on the back of new rate validities on 1 August. This was versus a fairly flat futures price, which as arguably already priced in GRIs, with FBX11 Q4’23 actually decreasing $25 from 23 May 2023 to 31 July 2023.

The relative squeeze on capacity on transpacific trades has had a positive impact on futures prices, with FBX01 China/East Asia to North America West Coast Cal’24 rising just over 25% from $1,775/FEU on 23 May to $2,225/FEU on 31 July. Rising value on settlement prices factors in firm markets on the FBX01 Q4’23+Q1’24 and the full FBX01 Cal’24, which has seen medium to large size BCOs seeking hedging solutions on futures, largely willing to pay a decent premium above spot prices. On this note, FBX01 spot prices had slowly crept up through July, with FBX01 seeing a 27% increase from 3 to 31 July (from $1,209/FEU to $1,543/FEU). With all the dire news in the market, spot price increases offer some hope to ocean liners, as well as drawing in much tighter two-way markets on container futures. 

About Peter Stallion, Head of Air and Containers, Freight Investor Services

Peter Stallion heads up the Air and Container Freight desks at FFA brokerage Freight Investor Services. He started his career in air freight chartering, and has a passion for emerging risk management markets and the logistics industry. Contact Peter at PeterS@freightinvestor.com.



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