FBX Index: An unsettled and uncertain market
The overall FBX index has increased slightly by 1%. This does not mean that all trades have increased – some have increased more such as the Asia to USWC, up by 6%, while some have declined such as Asia to North Europe, which is down by 8%. However, the container shipping sector is never one to lose sight of a good arbitrage opportunity and when trades get misaligned in terms of pricing, vessels tend to get re-deployed. Hence for a general state of the market, the overall index is the better guideline.
This means that there appears little faith that the market is about to get weaker from a spot rate perspective. However, looking more broadly, this does not appear to be the case.
The start of March every year sees the TPM conference hosted in Long Beach and it is by far the largest of dedicated container shipping conferences with strong participation of all stakeholders. After a pandemic-induces hiatus, TPM returned this year with more than 2,500 participants, along with the same themes and sentiments that permeated all presentations and informal discussions.
There was no sense that the current challenges related to supply shortages and bottleneck problems would be resolved in the short term. The consensus more pointed towards 2022 being a transition year and a return to full normality by 2023. Of the presentations made, the carriers were likely the most optimistic, with a hope for normality in Europe by this summer but later in the year when it comes to North America.
This also spilled over into freight rate expectations where data was presented pointing to contract rates being signed at levels more than 100% higher than those made a year ago, as well as many being signed for up to two years.. This implies an expectation on the part of the shippers that the current problems will not be resolved in the short term.
Carriers are also confident that this market strength will persist a while longer, as can be seen from the time charter market for vessels. For example, two vessels were taken on time charter in the past week both at 140,000 USD/day. One was a 20-year-old 4,400 TEU vessel that before the pandemic would have likely fetched 10,000 USD/day and would soon be headed for the scrap yard. The other was a six-year-old 2,200 TEU vessel, which would likely have fetched 8,000 USD/day before the pandemic.
Looking at the data for January, global schedule reliability plummeted to yet another low point and as a result 12.7% of the global capacity remained effectively unavailable due to queues outside congested ports.
All in all, both the hard data and the subjective “sentiment” amongst 2,000 active industry stakeholders point towards continuing problems and no short-term alleviation in the market at large.
Source: Baltic Exchange