FBX Index November 2024: Looking forward

October provided a bit of a shock to the container market with the development of a pre-US East Coast port strike market quickly dashed, only to be potentially postponed into January 2025. This could be exacerbated with the potential impact of the US election and more of the ‘closed Red Sea status quo’ amid the persistence of tensions surrounding Israel and its neighbours.

Key Points

FBX03 Asia-USEC rates have collapsed, well through their regular FBX01/03 premiums even with the increased cost of Panama Canal transit and increased sailing time. This comes as US East Coast port strikes are resolved (for now).

October/November General Rate Increases (GRIs) bolstered rates, with buyers coming in against a rapidly retreating offer level – later with the spot price on FBX11 jumping to GRI levels in the end of October

January port strikes still remain a threat for the US East Cost, although this remains highly uncertain and perhaps heavily linked to the outcome of the US election (another source of volatility).

We are running into contract negotiation period, with Cal25 contracts becoming more interesting after offers sitting without takers for most of 2023.

FBX03 spot prices opened the month at a relative high of 7,904 USD/FEU, ending up closing a tick above its lows at 5,247 USD/FEU with futures prices moving largely in lock-step. This is in stark contrast to FBX03 Q4’24 trading earlier in the year at $8,650 with longs pulling out of the market just prior to the collapse of spot rates.

Transpacific

FBX01 and FBX03 proved to be quite unclimactic after weeks of build-up on both futures and spot levels in the run-up to potential port strikes on the US East Coast, which ultimately lasted one day before being resolved (with a little pressure from the White House). FBX03 spot prices opened the month at a relative high of 7,904 USD/FEU, ending up closing a tick above its lows at 5,247 USD/FEU, with futures prices moving largely in lock-step. This is in stark contrast to FBX03 Q4’24 trading earlier in the year at $8,650, with longs pulling out of the market just prior to the collapse of spot rates.

This has led to a peculiarity in FBX01/FBX03 spot price spreads (the difference between the Asia-US West Coast and Asia-US East Coast spot prices), which had converged to almost flat, even whilst US East Coast transit requires physically greater sailing time, fuel consumption and transit through the Panama Canal. This opens up a trade basis with the restoration of the premium paid to move cargo into the US East Coast versus the US West Coast.

GRIs attempted to raise 40ft container rates to approximately $4,500/FEU – immediately reflected by a corresponding rise in FBX11 spot rates at the end of October. Q1 bids subsequently came earlier in October at $3,300 before offers retreated, largely led by a surge in INE SCFIS values.

Asia-Europe

The vast majority of the price action on Asia to Europe (and Asia to the Mediterranean) has been on the heels of GRIs announced by a slew of ocean liners in October, effective through the end of November. GRIs attempted to raise 40ft container rates to approximately $4,500/FEU – immediately reflected by a corresponding rise in FBX11 spot rates at the end of October. Q1 bids subsequently came earlier in October at $3,300 before offers retreated, largely led by a surge in INE SCFIS values. This has widened the arbitrage FBX/INE, expanding on what have been pretty persistent opportunities against both exchanges as INE and FBX liquidity develops.

Much like the Transpacific, FBX11/FBX13 spot spreads have also sharply narrowed, with spot spreads sitting at +170 USD/FEU at the end of October (albeit sharply reversing again early in November on the back of GRIs).

US Election Special

Picking up on the fervour of what would appear to be a tight-run election race in the United States, this throws up a number of tradable perspectives. A Trump victory would threaten to throw in some shocks to the container freight market – any threats of tariffs risking a rush of cargo (as we saw earlier this year) looking to beat the timeframe of any punitive legislation. In the long term, depending on how aggressive the stance of the new administration is on the situation in the Red Sea, we could see spot prices (and thus futures) start to decay in line with a fundamental outlook for vessel oversupply. On the backhaul, again mostly focused on the potential for trade wars, this could follow a prior trend of pressure on US-China exports, which would start to impact FBX02 US West Coast-Asia. We might also see a shift of cargo from Asia-US to Asia-Europe, potentially positive for Asia-Europe, and negative for Asia-US rates.
Source: Braemar