The big news for all of those following the container freight futures market is that cleared container freight futures will be listed on CME from 28 February 2022. This will enable companies, to hedge the extraordinarily volatile container freight rates prevalent since Q2 2020

The big news for all of those following the container freight futures market is that cleared container freight futures will be listed on CME from 28 February 2022. This will enable companies, to hedge the extraordinarily volatile container freight rates prevalent since Q2 2020. This has galvanized the support from many of those in the market who have been demanding hedging tools, including support from key container lines which have expressed explicit interest to trade the market after its launch. Looking forward into interest and potential liquidity we can already see forming across a range of counterparties, all the way out with prospective offers up to the last cleared month in December 2024.

Forward prices still remain heavily backwardated until the end of the curve in 2023, but sit well above very-long term contract prices, again opening up an opportunity for sellers on the futures market.

All eyes are on the impact of changes in some quite consistent fundamentals that have driven the cost of container freight to record high levels over the past 18 months. December saw rates come off slightly on the major Asia outbound headhauls, particularly into North America, largely driven by the shedding of freight rate premiums and surcharges rather than any changes in the base FAK price. FBX01 China/East Asia to North America West Coast shedding 22.19% since 5 November with a correlated move on FBX03 China/East Asia to North America East Coast down 12.15% in the same period with the West/East Coast widening with more congestion into the East Coast. Congestion into Long Beach continues to dominate the press with slight alleviation; however this is not enough to explain a large drop in rates. Demand is generally expected to remain supportive until Chinese New Year (coming in early on 1 February), but the near-term prices have been volatile intraweek. This has caused volatility in current and front month curve prices however the longer-dated contracts have remained quite consistent, FBX01 Cal22 indicative value sitting within a $10,000 to $11,000/FEU range. Forward prices still remain heavily backwardated until the end of the curve in 2023, but sit well above very-long term contract prices, again opening up an opportunity for sellers on the futures market.

FBX11 has continued to correlate with FBX13 China/East Asia to the Mediterranean carrying around a $1,000 discount from FBX11 and has behaved similarly.

On the Asia-Europe trade, spot prices have seen less erratic price changes however the market remains volatile, FBX11 China/East Asia to North Europe dropping value since November however seeing a slight boost in the start of December. However as with the transpacific, Cal22 prices are still inside of a $9,500-$10,100 range as they have been since the end of Q3 last year. FBX11 has continued to correlate with FBX13 China/East Asia to the Mediterrenean carrying around a $1,000 discount from FBX11 and has behaved similarly. The Asia-Europe trade (along with most routes) has largely been impacted by continued congestion and strong demand on the transpacific route, sucking capacity away from other routes. Alongside this, oil prices are temporarily weaker due to the spread of Omicron and its impacts on consumption. Even with this, the oil price seen a recovery since 2020 which will feed into support for freight prices. And despite optimism on COVID and COVID-limiting measures in Europe and North America, China’s hard-line zero-case attitude towards COVID has and may continue to impact the effective working of Chinese ports, which may also throttle supply chains into 2022.

 

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.



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