Summary

Spot rates climb into the close of 2024 across all front-haul routes ahead of Chinese New Year in January 2025, with Chinese economic stimulus lending to the momentum of rate increases. This is countered by looming overcapacity and the potential of carrier rate war following the breakup of key alliances.

 

Key Points

  • The impending Trump administration starts to have a noticeable impact on Asia-US and Asia-Europe trades, compounded by the Chinese New Year triggering a spike in January rates and seeing futures contracts trade relatively higher than earlier in 2024.
  • FBX futures prices have been volatile, in line with a very volatile spot price despite a drawdown of physical volume as we closed out of 2024. Jumpy spot prices have been indicative of a lack of consensus for freight outlooks.
  •  Chinese economic stimulus provided
  • Asia-Europe/Asia-Mediterranean spreads have been jumpy throughout the end of the year, initially recovering their mid-COVID premium, now falling closer to flat. This provides an opportunity for spread trading into FBX13 Asia-Med, taking advantage of the relative liquidity on FBX11 Asia-North Europe.

 

Asia-US

In terms of Container Freight Futures, Transpacific prices have remained remarkably flat up until the very end of 2024, FBX01 rolling front month prices dipped through $3,700/FEU before a sharp climb in line with aggressive gains in spot prices, finishing December at $4,695/FEU before gaining again into the beginning of January. Bullish sentiment spills over into FBX03 Asia-USEC, with strong bid interest on Jan’25 contracts. 

Buying interest on FBX03 comes in line with the re-emergence of the risk of port strikes on the US East Coast as the International Longshoreman Association (ILA) fights back against proposals for port automation, ostensibly backed by President-Elect Trump. Impacts on spot rates have been acute, with FBX03 Asia-USEC gaining $1,735/FEU (or 33.4%) from the beginning of December through to 2nd January 2025.

Buying interest on FBX03 comes in line with the re-emergence of the risk of port strikes on the US East Coast as the International Longshoreman Association (ILA) fights back against proposals for port automation, ostensibly backed by President-Elect Trump. Impacts on spot rates have been acute, with FBX03 Asia-USEC gaining $1,735/FEU (or 33.4%) from the beginning of December through to 2nd January 2025.

Asia-Europe

FBX11 Asia-North Europe freight futures continue to see most of the action on the Singapore Exchange (SGX) – whilst markets struggled to find traction through November, December sparked up Jan’25 and Feb’25 trading interest, with the full Jan+Feb’25 strip trading at $4,750/FEU.

FBX11 Asia-North Europe freight futures continue to see most of the action on the Singapore Exchange (SGX) – whilst markets struggled to find traction through November, December sparked up Jan’25 and Feb’25 trading interest, with the full Jan+Feb’25 strip trading at $4,750/FEU. Selling interest quickly pulled back as spot rates on FBX11 realised a 27.4% gain from the beginning of December 2024 through to 2nd January 2025, up +$1,230/FEU to $5,721/FEU. Pricing now extends all the way through to Cal27 (Calendar Year 2027, the equivalent of an annual futures contract) with clearing available for the entire period, which has initially been attracting offers.

FBX13 Asia-Mediterranean rates have continued to rationalise and trend closer to FBX11 Asia-North Europe, closing out much of the premium between the two routes. Even with this, FBX13 futures are still pricing at a premium to FBX11 futures, indicating that traders expect the spread between FBX11 and FBX13 to widen.

 

The COSCO effect

A special (and late) feature to this report, but very difficult to miss, has been the surprise black-listing of COSCO by the US Defence Department at the time of writing (07th January). Whilst I’m quite fortunate my late entry to the Baltic Exchange Container Update allows me to add this to the update on COSCO, the same could not be said for the impact this might have on container freight. 

Whilst Tanker FFAs had seen a slight uptick in TD3C rates, sentiment is that this blacklisting targets COSCO container freight business specifically. Whilst time will tell if there is any concrete sanctioning of COSCO (or indeed any outright banning, as happened in 2019 with tanker freight resulting in an extreme upswing in tanker charter rates) – we could not think of a more perfect highlight to drastic geopolitical interference in the container market which will have direct ramifications on container freight rates.

Whilst Tanker FFAs had seen a slight uptick in TD3C rates, sentiment is that this blacklisting targets COSCO container freight business specifically. Whilst time will tell if there is any concrete sanctioning of COSCO (or indeed any outright banning, as happened in 2019 with tanker freight resulting in an extreme upswing in tanker charter rates) – we could not think of a more perfect highlight to drastic geopolitical interference in the container market which will have direct ramifications on container freight rates.

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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