FBX Index May 2024: Looking forward

Overall, most FBX routes saw increases in both spot prices and forward curve rates. Increased demand in Asia-European trades, coupled with ongoing Red Sea diversions and geopolitical tensions, likely contributed to these rises, although tensions eased towards the end of the month.

Futures activity has remained muted so far this month, with selling interests seen earlier in the year receding. It remains to be seen if the recent spikes we have seen across the routes mentioned above bring this back to the market. Meanwhile, volatility in these indices demonstrates again the potential economic utility of entering hedges given the current geopolitical uncertainty.

There are several opportunities to trade the current curve shape, with all routes being in backwardation, but with the curves (and futures settlements) flattening. Selling spot or the nearby and buying deferred in the futures market would be an obvious way to play current market conditions.

Several of the larger market participants have indicated they would be open to selling deferred (including Cal 25 and 26), presenting an opportunity of sorts on the FBX futures. Equally a Q3/Q4 24 spread or a Q4 24/Q1 25 spread present trading opportunities depending on the outlook of geopolitical stability and the availability of new boxes. We expect to facilitate the execution of some of these structures very soon with opinions divided on how prices develop going forward.

End users, suffering from this volatility and historically elevated price levels continue to look for entry points to hedge forward levels . As mentioned above, several of the larger balance sheets who are active in the market have been seeking to sell Cal’25, 26 strips and potentially H1 or H2 ’25 strips, again representing an opportunity to defend margins in the event of further geopolitical “black swans” and smooth future cashflows.

Over the past month, the FBX index initially remained stable until the beginning of May when it saw a significant increase to $2,863/FEU from $2,503, marking a total rise of $360 for the month.

FBX01, covering shipments from China/East Asia to North America West Coast, experienced an overall rise of $715 to $3,978 on 3 May, despite a mid-month dip to $2,627, swiftly recovering thereafter. The forward curve for FBX01 showed Q3 24 rising by $50, while Q1 25 and Cal 25 dropped by $50 and $100, respectively, by the start of May.

In contrast, FBX02, North America West Coast to China/East Asia, saw a nearly 14% decrease in spot price during April and early May, dropping from $415 to $357. The forward curve for FBX02 remained steady throughout April, with prices ranging between $330 and $340 for all available periods.

FBX03, China to North America East Coast, witnessed a notable increase of $1,117 across April and into early May, mainly driven by a spike of 28% to $5,393 on 2 May. The forward curve for FBX03 also showed increases across the board.

Similarly, FBX11, covering China/East Asia to North Europe, experienced a spot rate increase of $525 during April and early May, primarily due to a 12% daily rise on 3 May. The forward curve for FBX11 also showed upward trends.

FBX12, North Europe to China/East Asia, observed a spot price decline of 22% in April, falling from $879 to $687, with corresponding drops in forward curve levels.
FBX13, China/East Asia to Mediterranean, saw an overall increase of $359 during April and early May, with fluctuations throughout the month and a sharp increase to $4,909 at the beginning of May. The forward curve for FBX13 reflected these changes.
Source: Freight Investor Services