Indices and futures bid/ask levels have firmed dramatically in recent days and weeks because of the Red Sea crisis.

Container freight rates have surged globally, affecting various trade routes. The transatlantic shipping route is experiencing rising spot rates, with carriers planning significant surcharges and general rate increases (GRIs). Maersk and CMA CGM have announced peak season surcharges and rate restoration initiatives for shipments from North Europe to the United States and Canada. The Federal Maritime Commission has waived the 30-day notice requirement for surcharges due to the Red Sea crisis, but carriers must comply for transatlantic shipments, leading to anticipated substantial charges. In the Asia-Europe route, carriers have declared force majeure, imposing surcharges on in-transit cargo. Spot rates are spiking despite weak demand. The transpacific route is also affected, with rates increasing for Asia-US trades, driven by Panama Canal restrictions and Suez Canal diversions impacting services to the US East Coast. Overall, the container freight market is facing disruptions, contributing to widespread rate hikes and surcharges.

FIS has seen the key FBX11 route attracting bids and offers on the Cal’25 strip, with offers hovering around the $4,500 mark.

All FBX routes have been dramatically impacted by the crisis, predictably FBX11 (China/East Asia to North Europe) and FBX13 (China/East Asia to the Mediterranean) showing the sharpest increases. FBX11 stands at $4,789 as of 8 January 2024, having been at $1,446 on 8 December 2023 and $1,446 on 8 January 2023. Similarly, FBX13 stood at $1,482 on 8 January 2023, rising to $2,299 on 8 December 2023 and standing at $5,202 on 8 January 2024). FIS has seen the key FBX11 route attracting bids and offers on the Cal’25 strip, with offers hovering around the $4,500 mark.

Following the dramatic index adjustments starting in the latter part of December 2023, in contrast to the wider dry FFA complex, there has not been any form of technical correction in the FBX indices or forward curve. Interest on both sides of the market is emerging as consumers look for cover, and the sell side look to protect margins.

Principals holding Index-Linked contracts against FBX and other container indices now have an obvious opportunity to lock in the margin with container FFA’s settled against FBX. End-user interest remains strong and we expect to see more container FFA trades close on the back of this increased volatility.

Principals holding Index-Linked contracts against FBX and other container indices now have an obvious opportunity to lock in the margin with container FFA’s settled against FBX. End-user interest remains strong and we expect to see more container FFA trades close on the back of this increased volatility.

All routes have been affected, as the market prices in out-of-place assets and the diversions and disruption caused by the crisis. The China/East Asia to the Americas are seeing similar, albeit slightly less dramatic hikes in rates, with FBX01 rising from $1,590 on 8 December 2023 to $2,713 on 8 January 2024 compared to $1,076 on 8 January 2023. Similarly, FBX03 stands at $4,234 today, compared to $2,490 on 8 December 2023 and compared to $2,239 on 8 January 2023. The back haul routes are a more mixed picture with FBX12 more than doubling to $708 on 8 January 2024, with FBX02 depreciating down to $312 today, from $354 on 8 December 2023 and down from $406 on 8 January 2023. The risk premium being built into the forward curve on all routes suggests that the market believes volatility will remain in place for the foreseeable future.

The volatility being seen in the market is an important lesson in the value of hedging for any commercial organisation impacted by container rates. Volatility appears to be here to stay and the judicious application of container futures in a coherent risk management strategy can protect hard-won margins; whatever side of the market one is coming from; consumer, freight forwarder, ocean liner or any market participant who has exposure to container rates. 

About Kieran Walsh, Commodity Broker, Freight Investor Services

Kieran is a commodity derivatives broker with expertise in swaps, futures and options. He joined FIS in June 2022 and is helping to lead their drive in the container FFA space. FIS is a leading, global commodity derivatives and physical broker specialising in freight and commodity markets. Kieran studied Economics at the Royal Holloway University of London. Contact Kieran at kieranw@freightinvestor.com.



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