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FBX Index December: Looking forward

December looks like another bullish month for container freight rates, with increasing supply constraints caused by global concern over the new Omicron variant. With high demand for goods in the quarter ahead of the year end festive period, coupled with the existing congestion in the supply chain, the market remains historically expensive with little prospect of this changing anytime soon.

Ongoing labour and infrastructure shortfalls further magnify challenges and add demand to the situation. Crew changes remain difficult, with many stranded onboard and unable to be replaced or repatriated due to a lack of international flights and local lockdowns exacerbated by the new variant. These factors continue to increasingly impact the market with smaller shippers at a disadvantage when negotiating rates and booking space on ships, as they are less able to absorb the increased additional expenses.

Primary fronthaul route rates continue to move higher. FBX01 China/East Asia to US West coast, continues to move up with spot rates now at $14924 and FBX03, China/East Asia to US East coast now at $16865. FBX13 China/East Asia to the Mediterranean spot rate now moves up to $13260. FBX11 China/East Asia to North Europe spot is now at $14320. Back haul routes continue to mainly tick slightly lower from Europe with FBX14 Mediterranean to China/East Asia now at spot $1492. Although the current situation means back haul from the US has ticked higher, with FBX02 North America (West) to East Asia now at $909. FBX04 North America to Asia is now at $847.

In terms of forward pricing, whilst near-term markets inside of Q4 2021 continue to be rocked by constant spot-price changes influenced largely by developments in port congestion, 2022 and 2023 trades continue to hold quite solid on the sell side of the market. We see more buying interest inside of 2022, and more selling interest inside of 2023, opening opportunities to sell the spread between 2022 and 2023, playing into market consensus that container freight prices will taper over the next two years.

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.
Source: Baltic Exchange

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