Moving into July, the outlook for containers is becoming ever more opaque. The ongoing conflict between attempts to ratchet up spot rates versus a seemingly overwhelming orderbook through the 2023 and 2024 period have rattled forecasts that have been able (in the very short term at least) to absorb what would have been substantial market movers in almost any other market condition over the past 10 years (key examples including the temporary shut down of US West Coast ports and the potential for restrictions in the Panama Canal). However, even with rates shrugging off significant events in the market, we have seen futures continue to trade out through to the end of this year as reasonable premiums above spot rates, with most of the focus on the FBX11 China/East Asia to North Europe trade lane. 

Using FBX11 Q4’23 as an indicator, values have buffeted around a steady range since April 2023 – with values falling from a high of $2,300 in April to a low of $1,825 in mid-May before finally trading at $2,050/FEU in June. FBX11 Q3’23 saw a similar pattern, falling from a high in April of $2,500/FEU before shedding 32% in value to $1,700 mid-May, subsequently trading at $1,975/FEU. 

Using FBX11 Q4’23 as an indicator, values have buffeted around a steady range since April 2023 – with values falling from a high of $2,300 in April to a low of $1,825 in mid-May before finally trading at $2,050/FEU in June. FBX11 Q3’23 saw a similar pattern, falling from a high in April of $2,500/FEU before shedding 32% in value to $1,700 mid-May, subsequently trading at $1,975/FEU. As a result, near-dated futures are commanding approximately a 70% premium above prevailing spot prices on the Asia-Europe route through June. Following on from futures trades comes the announcement from Maersk for a rate hike on the Asia-Europe tradelane, attempting to bring FAK spot prices up to $1,900 by the end of July. Whilst the announcement comes in line with the level futures are trading – prior attempts at rate increases (although highly geared towards the transpacific routes) have failed to gain their full traction, although they had seen a characteristic uptick in rates followed by a trail down as rate increases appear to lose their grip. It is interesting to see that rate announcements come directly in line with the futures trading, highlighting the value futures contracts have even with spot rates on comparative doldrums.

It is interesting to see that rate announcements come directly in line with the futures trading, highlighting the value futures contracts have even with spot rates on comparative doldrums.

The renewed focus on the Asia-Europe route also comes with a shift in capacity (led by Maersk and MSC) away from the Asia-US trade and into Asia-Europe, with HMM going as far as to open a standalone service on the Asia-Mediterranean route as a signifier of its strength. Alphaliner reported a 23.3% decrease in available slots on the Asia-North America trade in June 2022, led by MSC reducing its exposure to the transpacific fronthaul by 35% year on year. 

Transpacific rates have been remarkably flat ever since GRIs implemented mid-April, however even with this FBX01 Q4’23+Q1’24 had come in bid at $2,000/FEU (a 65% premium above spot) – with the full Cal’24 annual contract bid at $1,800/FEU. 

Whilst a good sign for those hoping for effective capacity management on a tradelane that is suffering from overstocked inventories and lack of demand, there is a risk that the shift of capacity into other routes could result in oversupply. This would impact the likelihood that Maersk’s recent rate gamble could fail. Transpacific rates have been remarkably flat ever since GRIs implemented mid-April, however even with this FBX01 Q4’23+Q1’24 had come in bid at $2,000/FEU (a 65% premium above spot) – with the full Cal’24 annual contract bid at $1,800/FEU. Evidently, this is nowhere near the levels we saw during the Covid bull market, but futures levels challenge contract prices in favour of asset owners, and ocean liners are a time of slim pickings for a now beleaguered sector. Alongside this we have seen a definite growth in index-linked contracting, offering a method for BCOs to buy multi-year contracts at far renewal rates, whilst providing some potential upside for liners relative to how low spot rates have gotten over the past six months.

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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