A new year, a new container market? This might not be the case, given the enormous number of variables the container market will face, because many in the market have baked in a conclusion that 2023 will be bearish on the back of large orderbooks and ship deliveries from the second half of 2023 onwards. The Covid period proved the point that you should probably never attempt to be certain about the state of the market beyond the front of your nose. Whilst 2021 prices had been openly seen as heavily inflated, which was adirect result of extraordinary demand, 2022 saw a rapid decline in spot rates (the FBX01 China/East Asia to North America West Coast route down 93.17% from market highs in September 2021) was faster than many expected. This has caught many businesses that had locked in two-to-three-year flat-price deals short, triggering contract renegotiations throughout the second half of 2023.

FBX03 China/East Asia to North America East Coast Cal23 has seen a similar decrease of 49.11%; however, crucially FBX03 has yet to pull down through to 2019 average levels. The collapse in spot rates has pushed the futures market into contango (futures prices are above spot prices), with FBX03 attracting buying interest at around a $200 premium above spot for 2024

We’ve seen this sharp correction in rates reflected in futures contracts. On the transpacific, there’s been a bit of to-and-fro between West and East Coast prices, largely because of industrial action on the West Coast – the positive impact in terms of schedule reliability has been the near complete elimination of congestion into the Port of Long Beach. FBX01 China/East Asia to North America West Coast Cal23 prices have continued to drop from $2,800/FEU on  October to $1,518/FEU on 22December – a 45.78% drop. FBX03 China/East Asia to North America East Coast Cal23 has seen a similar decrease of 49.11%; however, crucially FBX03 has yet to pull down through to 2019 average levels. The collapse in spot rates has pushed the futures market into contango (futures prices are above spot prices), with FBX03 attracting buying interest at around a $200 premium above spot for 2024. The rationalization of market prices has started to draw in firm buying and selling interest at a much tighter spread than what we saw through the majority of last year, a key ingredient to developing consistent liquidity on the major front haul contracts.

Using the FBX11 Cal23 as a benchmark, values have dropped 67.48% after trading at $3,500 in November, prior to steep four-figure drops in spot rates on the index. However, very recently, we have started to see futures value climb again as spot and futures rates bounce above a resistance level of around $2,000/FEU

On Asia-Europe, the picture has been far less certain. Whilst FBX11 China/East Asia to North Europe has mirrored the bearish trend on the transpacific routes, the end of December/ beginning of January has seen some sharp upward moves on spot prices (FBX11 jumped +$76/FEU to $2,712/FEU on 3rd January). Using the FBX11 Cal23 as a benchmark, values have dropped 67.48% after trading at $3,500 in November, prior to steep four-figure drops in spot rates on the index. However, very recently, we have started to see futures value climb again as spot and futures rates bounce above a resistance level of around $2,000/FEU. And whilst the ‘return to normal’ has been seen as positive for freight buyers, it has increased the impact of fuel (and soon emissions following the entrance of shipping into the EU ETS) – this may even generate an opportunity for those in the energy markets to spread trades off onto container freight futures. This increases the volatility in container freight prices, with price feedstocks taking more precedence over the cost of freight rather than simply looking at capacity supply and demand. 

With the supply and demand picture in mind, this has become very difficult to forecast. The presumption was that ocean liner capacity management (in the form of lay-ups and blank sailings) would be able to stem sharp moves in spot prices, but this has not been the case. However, the scale of blank sailings in 2023 versus the cyclical re-emergence of demand if and when European and North American economies emerge from recession, will be a critical factor to watch rather than simply focusing on orderbook deliveries. There may also be some commercial aims (i.e., price wars) to take into consideration with the utilization of vessels fluctuating from ocean liner to ocean liner, with this very much reliant on which ocean liner is willing to take today’s cheap cargo. This has also been behind a shift towards index-linking (across the full range of indices available to the market, including FBX). 

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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