March has been a month testing the limits of how far spot prices can move down across core fronthaul routes. This bucks the view that many short sellers have had up until this point that price action ‘has already happened’.

This is the first time this has happened in the history of the FBX Index, testing levels we saw during the infamous 2016 bear market that saw the collapse of shipping line Hanjin. Needless to saw this has drawn in buyers looking to secure value in a market that has quickly shifted into a steep contango on all fronthaul routes on both SGX and CME markets.

March has been a month testing the limits of how far spot prices can move down across core fronthaul routes. This bucks the view that many short sellers have had up until this point that price action ‘has already happened’. Pushing through into the first index print of April and a good indicator of where markets could be headed, FBX01 China/East Asia to North America West Coast spot breached $1,000/FEU to $990/FEU. This is the first time this has happened in the history of the FBX Index, testing levels we saw during the infamous 2016 bear market that saw the collapse of shipping line Hanjin. Needless to saw this has drawn in buyers looking to secure value in a market that has quickly shifted into a steep contango on all fronthaul routes on both SGX and CME markets. As of the end of the month FBX01 China/East Asia to North America West Coast Cal’24 value sits close to $2,000. The FBX03 China/East Asia to North America East Coast route is coming in bid firm on the Cal’24 at $2,500 – approximately $500 above spot values. So even with the highly depressing market we find ourselves in, asset owners and shipping lines can still sell futures at a premium versus today’s spot prices. 

The very low spot prices collide with highly volatile underlying prices (particularly crude and fuel), with OPEC+ production cuts spiking the price of crude. Lower spot prices on the FBX lead to fuel taking a greater share of the price fluctuation – making the prospective spot price on FBX arguably much more volatile. 

The physical backstory to these futures markets primarily features the postponement of contracts usually fixed in Q1 and Q2, with beneficial cargo owners opting to favour rock-bottom spot prices. There are still those willing to pay a premium for contract rates, however low spot prices have triggered a shift back towards index-linking that has been five to six months in the making. This is drawing in interest on the futures on both the buying and selling side of the market. The futures market is potentially becoming more attractive as a means to hedge prices. The very low spot prices collide with highly volatile underlying prices (particularly crude and fuel), with OPEC+ production cuts spiking the price of crude. Lower spot prices on the FBX lead to fuel taking a greater share of the price fluctuation – making the prospective spot price on FBX arguably much more volatile. Capacity cutting measures and slow-steaming have also created a tighter capacity market, with any return of demand able to be managed by ocean liners that may have learned from similar experiences during the pandemic period. 

Indicators for genuine volatility come from the Asia-Europe and Asia-Mediterranean routes. FBX11 China/East Asia to North Europe has only just rebounded after months of losses, however FBX13 China/East Asia to the Mediterranean continues to oscillate around the $2,500/FEU mark with the premium on the route attracting sellers of the FBX13 outright April to December 2024 at $3,800, and the FBX13 vs FBX11 spreads. It has become very clear over March that the market, although temporarily moving comparatively side-ways,  that there is no single direction in the market price. This is opposite to 2022, which saw many liners (by accident or design) call the top of the market after two to three year contracts were signed in the beginning of 2022 – and subsequently collapse straight down to their current levels.

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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