Just two weeks into the new US administration, it is fair to say the Trump Effect (Part Deux) is firmly influencing markets (and unsurprisingly not just in freight). With the potential for new US tariffs, compounded with sudden (if slightly predictable) drawdown of hostilities in the Red Sea, it is as if a hammer has been taken to front haul freight rates across the board, with every point on listed FBX routes impacted. Main hauls on Asia-Europe and Asia-US have begun to fall just in time for contracting season, however all remains to play for as the Trump administration opens a Pandora’s box of possibilities for 2025.

 

Key Points

  • Asia-Europe and Asia-Mediterranean spot prices trigger a collapse (FBX11 spot rates down 32.67% through January) with real risks of further disruption still looming
  • Oil prices (a constituent of Bunker Adjustment Factor, BAF) weigh a greater impact on the prices customers pay for freight.
  •  Transpacific rates held up through most of January, however started to fall (particularly into the US West Coast) at the end of the month, however forward curves priced in a fall well ahead of the spot rate
  •  Futures rates fall through a critical $3,000/FEU level and start to come into the ballpark of Beneficial Cargo Owners (BCOs) just as index-linked contract uptake continue to rise.
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Asia-US

The supportive older brother of Asia-Europe in terms of price action and spot rates, Asia-US rates (both FBX01 Asia-USWC and FBX03 Asia-USEC) held up through most of January, largely bolstered by the (once again unrealised) impact of proposed port strikes proposed by the International Longshoreman’s Association (ILA). Thereafter the impact of Asia-Europe trade route geopolitics (and the possible return of Suez transit) weighed heavily on rates, particularly on the US West Coast (spot rates ending up down 15.16% and still falling).

As has been fairly common since last year, futures rates continued to price the reality of forward spot markets well ahead of time, with FBX01 rolling front month futures holding a 18% discount from spot. Sellers of long-dated contracts (Q3, Q4’25 and Cal26) maintained quite a steep discount from spot prices, with BCOs looking to buy Cal26 potentially taking advantage of a near 50% discount from current spot prices.

As has been fairly common since last year, futures rates continued to price the reality of forward spot markets well ahead of time, with FBX01 rolling front month futures holding a 18% discount from spot. Sellers of long-dated contracts (Q3, Q4’25 and Cal26) maintained quite a steep discount from spot prices, with BCOs looking to buy Cal26 potentially taking advantage of a near 50% discount from current spot prices.

FBX03 Asia-US East Coast remained remarkably strong through January, only to drop off in line with FBX01 at the very end of month. However, futures pricing kept pace with sentiment, pricing a sharp discount even whilst spot prices remained strong.

 

Asia-Europe

The focal point of some of the drastic shifts in the geopolitical landscape through January, FBX11 Asia-Europe fell off consistently through January, closing 32.67% lower by the end of the month. Whilst FBX13 Asia-Mediterranean fell off only 9.86%, the premium between FBX11 and FBX13 closed down rapidly through the end of the month.

The big story continuing to dominate the Asia-Europe trade remains the ongoing issues in the Red Sea and the risk to commercial vessels. However, this came to its climax through January, triggering weakness in spot rates.  Jan+Feb’25 contracts, which were trading at $4,750/FEU earlier in the month, are now sitting around a $3,500/FEU settlement price. Much like Transpacific futures rates, the longer-dated contracts are sitting at a drastic discount, offering an opportunity for hedging at rates at much lower levels than through the bulk of 2024.

The Trump impact (and the eventual realisation of tariffs) might throw a spanner in the works of any BCO trying to game out much lower rate in physical markets. The pressure of tariffs on cargo from Asia-US potentially could well push more cargo onto the Asia-Europe route – an effect that was actually realised through the last Trump presidency (if washed out by the impact of the pandemic).

The Trump impact (and the eventual realisation of tariffs) might throw a spanner in the works of any BCO trying to game out much lower rate in physical markets. The pressure of tariffs on cargo from Asia-US potentially could well push more cargo onto the Asia-Europe route – an effect that was actually realised through the last Trump presidency (if washed out by the impact of the pandemic).

In addition, the rhetoric between China, US and Europe continues to raise the spectre of more rather unpredictable shifts in health of consumer economies. Anecdotally, liner companies are now well-versed in the benefit that can be garnered from any triggers that can bolster rates. This comes alongside the potential for rate-wars between new and old alliances, who may wish to minimise market overcapacity that had been almost completely eliminated through 2024.

About Peter Stallion, Freight and Energy Derivatives, Braemar

Peter Stallion heads up the Container Freight and Cross-commodity desks at Futures brokerage Braemar Securities Ltd - a part of Braemar Shipbroking. He started his career in air freight chartering, and helped launch FBX-settled Container FFAs, and has a passion for emerging risk management markets and the logistics industry.


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