China’s Containerized Freight Index Futures saw high trading in its launch week, despite spot Asia-North Europe freight rates losing most of the gains made in the past month.
The EC2408 (August 2024), EC2410 (October 2024) and EC2412 (December 2024) contracts closed the week between 4% and 8% higher than their launch on the Shanghai International Energy Exchange on 18 August.
Prices for the EC2404 (April 2024) contract ended 6% lower than on debut day, but trading volumes were focused on this contract, which accounted for over 85% of the daily trading volumes.
Shanghai International Energy Exchange revealed that the busiest players were forwarders and financial and commodities traders.
Linerlytica commented that the market was in “backwardation, as the futures are trading mostly below the Shanghai Containerized Freight Index (settled prices) spot index of 1,039”.
The EC2408 closed at $1,006/teu, the highest price among the four contracts traded, reflecting the normal container shipping seasonality that typically peaks in Q3, but remains below current spot prices, with market players still anticipating a rate drop over the coming 12 months.
Average trading volumes reached $2bn a day, which is much bigger than the physical market on the Asia-North Europe route, while open interest steadily climbed to 28,900 lots. At Friday’s closing price, open interest amounted to $177m.
Rates to North Europe continued their recent slide, and carriers have given up all the gains from the GRIs implemented since July. Newbuild deliveries in August have added 10% of capacity, compared with July, with mainline operators showing little interest in capacity management in the face of the substantial new tonnage on its way.
Interest in container shipping futures is high in China, which relies on shipping to transport 90% of its exports and imports, and container shipping accounts for half those shipping requirements. And as container shipping went from an up cycle to pre-Covid lows in the past three years, shippers and liner operators have been able to hedge their risks.