Quite a dramatic apparent change in forward pricing, however there was very little change in near-term sentiment as we pushed through July. The big news is the result of the Baltic Exchange’s audit of the trans-Pacific head-haul routes, largely attracting positive market reviews as a fully ‘all-inclusive’ price, and a unique demonstration of the value of the lane. 

FBX01 China/ East Asia to North America West Coast (and indeed the correlating FBX03 North America West Coast route) sits in a shallow contango for Sep21, breaching the $20,000/FEU all-inclusive mark and drifting down with very little appetite to lock in very high rates.

Capacity remains extremely tight, placing a preference on the ‘premium’ side of the business that has taken predominance. Proportional to the spot price changes, FBX01 China/ East Asia to North America West Coast (and indeed the correlating FBX03 North America West Coast route) sits in a shallow contango for Sep21, breaching the $20,000/FEU all-inclusive mark and drifting down with very little appetite to lock in very high rates. Surprisingly, appetite has grown to instead lock in ‘relatively’ high rates with 2021 remaining very strong, Q421 finishing offered at $15,500 indicatively. Cal22 and Cal23 (full annual FFA contracts for 2022 and 2023) have ticked up as we moved through the month, FBX01 Cal22 value increasing an enormous $2,250/FEU from 8 July to date.

Asia to Europe has been transacting slightly differently. Whilst premiums are still a feature, these have largely been captured by most indices – FBX capturing a higher level of granularity for the full trade-lane and historically the route weighted with index-linked contracts. This period remains relatively inside of the curve in terms of spot prices, FBX11 China/East Asia to Europe Aug21 ticking up in line with an approximate $900 increase spot prices over the month. 

More interesting has been a persistent tick up in Cal22 and Cal23 levels as with the trans-Pacific – FBX11 Cal22 up $1,000 on value from 8 July to date.

More interesting has been a persistent tick up in Cal22 and Cal23 levels as with the trans-Pacific – FBX11 Cal22 up $1,000 on value from 8 July to date. Near-term remains supportive however caution as started to feed into the market – specific carriers looking to lock-in longer term rates have been aiming to offload risk onto the market with fixed term contracts of up to three years on a blocked-space MQC basis. This has been driving quite a rapid increase in sell-side counterparties for the FFA, something extremely important for the health of the market after the launch of a cleared contract.

In general terms, the fundamentals that weigh on the longer term capacity prices are still a swollen orderbook as liners cash out of an enormous number of newbuilds. The liner community (and subsequently their customers) can now also look forward to large investments required for decarbonisation, either in the form of engineering or the cost of participating in the EU Emissions Trading Scheme as of 2023. As a barometer of long-term spend on goods, e-commerce giant Amazon recorded a surprise revenue shortfall year of year, bolstering the bear case for the container market through 2022/23.

 

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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