FBX Index June 2023: Forward rates fluctuate

In May the notion of green shoots in the container market was swiftly shot down by the collapse of a short-term bump in rates mid-April that had failed to hold on to its immediate traction. The near-term forward market appears less concerned about any swift change in demand fundamentals, rather more of a focus on the success or failure of General Rate Increases (GRIs) implemented by carriers in an attempt to ratchet up bearish spot rates.

Rather than delving into the container shipping rumour mill, the fluctuation of forward rates has both supported the 'shock value' of GRIs and also highlighted the apparent weakness of the underlying market, at least in the short-term.

FBX01 China/East Asia to North America West Coast rates saw the most of the GRI pop, mid-April GRIs forcing values up to $2,150 and hiding a fairly flat trend between 27 February and 26 May - shedding only $25 off of value from $1,800 to $1,775. Whilst also a symptom of what are now fairly normal levels of volatility, it appears the market has shrugged off carrier attempts to boost rates.

Lack of confidence also spills into the US East Coast. The major news has been the alleviation of any form of port congestion into the East Coast (arguably a result of labour disputes on the West Coast - but also linked to a resilient trans-Atlantic trade that has also been boosting Supramax Dry FFA rates). We have since seen a steady drift down in rates that have also shrugged off GRIs. FBX03 China/East Asia to North America East Coast Q3'23 slips $300 from 27 February to 26 May, from $2,900 to $2,600. The overloaded (and growing) orderbook has led to a shedding of curve values on longer-dated contracts, the Cal'24 dropping from $3,050 to $2,700 in the same period.

The trading focus is on the Asia to Europe trade - with FBX11 China/East Asia to North Europe finding a level of $2,050/FEU and trading there. Arguably expensive compared to some physical fixed priced contracts being arranged on the route - levels present a viable opportunity for asset owners and freight forwarders looking to cover contracted capacity, even with the spot market in relative doldrums compared to 2021/2022.

The market finds a level after collapsing through 27 February to 26 May, FBX11 Q3'23 down from $2,600 to the last done level of $2,050. Further out the Cal'24 value has collapsed 38.23%. Even with this, the market remains in contango (long term contract and future prices are higher than the cash or spot price for container freight) - with the market pricing a steep premium on FBX01 and FBX03. We have seen this mis-reported as backwardation, a statement that doesn't quite chime with reality and could dissuade asset owners and liner companies from locking in some potentially attractive rates.

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.

Receive monthly container market reports direct to your inbox.