FBX Index: Looking forward
For China to Europe, there is still everything to play for. Throughout December there appeared to be no cap on how far rates could climb, with spot rates on FBX 11 China/ East Asia to North Europe climbing from $3,470/FEU on 1st December 2020, to $5,662/FEU on 31st December 2020. Much of this increase remains linked to high demand, capped capacity and equipment shortages, putting a premium on the lifted rate for containers on the route. As a result, forward prices have undergone substantial corrections as the market chases runaway spot prices. As of writing the offer level for FBX 11 for Jan 21 now sits at $7,200/FEU, with much of this price increase carried through into the rest of the 2021 curve.
On the backhaul routes, FBX 02 North America West Coast to China/ East Asia saw a gain from $391/FEU to $591/FEU at the end of November, carried through into forward price gains and Jan 21 now offered at $600 indicatively.
On the backhaul routes, FBX 02 North America West Coast to China/ East Asia saw a gain from $391/FEU to $591/FEU at the end of November, carried through into forward price gains and Jan 21 now offered at $600 indicatively. Much of the focus has been on the high-paying fronthaul, with backhaul shippers (particularly agricultural producers and traders) feeling the pain of a drop-off in service levels, and in some cases a cancellation of entire shipments in favour of rapid container moves.
The focus for 2021 has then shifted as the 2020 market has developed. For the carriers, priority will be placed on locking in as much business as possible at the ‘new-normal’ market level. Reliance on traditional fixed-price contracts, in our opinion, may look good for the moments when the underlying market remains stable – however risk falling into the trap of becoming highly ineffective against forward market volatility. Contract performance remains a critical issue. For contract buyers, any form of long-term contract might increase exposure to a drop in the market rates, as buyers end up stuck with premium contract prices, or do as many always have done and drop out of contracts entirely.
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