Trading Update
Fundamental basket routes run out of steam as we reach the last half of November, with China to Europe going completely flat, and China to USA with a marginal gain of 1 cent over what has been a disappointing, if highly volatile Q4 peak. Beyond a sudden increase in volumes ex-Asia over the next two weeks, there is very little on the horizon to bolster an already weak year.
The top story remains the continual growth of Shanghai versus Hong Kong export prices, Shanghai to Europe and Shanghai to US gain 8 and 10 cents, versus a loss from Hong Kong of 9 and 7 cents. An almost 1 to 1 transfer of prices might reflect continuing transfer of price confidence away from the beleaguered Hong Kong logistics market.
As a result of a flat but stable two weeks of trading, front month values on the forward curve remain flat. However potentially a sign of things to come, December enters backwardation dropping off 2 cents on both EU and US lanes. This has lowered the overall year-end Q4 period by a further 1 cent. Businesses should keep on eye on the movement of Cal 2020 and 2020 monthly forward prices as these start to actively trade.
| Basket | USD/KG | CHANGE | CHANGE % | MTD |
| CHINA - EUR | 3.07 | 0.00 | 0.00% | 3.07 |
| CHINA - USA | 3.63 | 0.01 | 0.27% | 3.64 |
| Blended | USD/KG | CHANGE | CHANGE % | MTD |
| PVG/EUR | 2.93 | 0.08 | 2.81% | 2.90 |
| HKG/EUR | 3.21 | -0.09 | -2.73% | 3.24 |
| PVG/US | 3.55 | 0.10 | 2.90% | 3.52 |
| HKG/US | 3.74 | -0.07 | -1.84% | 3.77 |
Market Comment
Carrying over the sentiment from last week, momentum has fizzled with little fundamental driver for a further increase in prices within the underlying market. This might worry carriers and forwarders alike given the market has reached a pre-mature top, and the only way may well be down, through into December.
This current market stasis might also reflect a continual macro-economic stasis, as container rates gyrate at a historically low level despite a few weeks of gains and the Brent crude benchmark bumps up and down 1-2% on a daily basis. Reflective of a stand-off within several trade arenas, the global logistics market is at the jumping off point - IMO 2020 stands to add billions to the shippers bill, with the ramifications of spilling off to every middle distillate market (including jet fuel) as crack spreads widen.
A continual roll-back of US-China trade tensions as the Trump administration, despite appearances, backs out of trade war commitments. Although Trump-era decisions have historically been as volatile as air freight prices, the scene appears to be set for greater liquidity in cross-border commerce (particularly trans-Pacific commerce) into the second half of 2020. This falls in line with a general market perception that fundamentals will begin to shift in Q3.
However, as seems to be the on-going theme, freight industry predictions are typically lacking in accuracy. FIS stands by to provide contract security for counterpart's into the depths of the murky prospective market.
| Airfreight Route (AR) | Description | PREVIOUS | USD/KG | CHANGE |
| AGR 1 | HKG to LAX & ORD & JFK | 3.91 | 3.92 | 0.25% |
| AGR 2 | HKG to LHR & FRA & AMS | 3.2 | 3.24 | 1.25% |
| AGR 3 | HKG to SIN & BKK & PVG | 1.16 | 1.16 | 0.00% |
| AGR 4 | PVG to AMS & FRA & LHR | 2.94 | 2.94 | 0.00% |
Forward Curve - Indicative Update
| HKG/CN - EUROPE AGGREGATE LANES - USD/KG | ||||
| BID | ASK | VALUE | CHANGE | |
| Nov-19 | 3.04 | 3.10 | 3.07 | 0.00 |
| Dec-19 | 2.88 | 2.97 | 2.93 | -0.02 |
| Jan-20 | 2.77 | 2.89 | 2.83 | 0.00 |
| Q4 19 | 3.00 | 3.10 | 3.05 | 0.00 |
| Cal-19 | 3.00 | 3.10 | 3.05 | -0.01 |
| Cal-20 | 3.07 | 3.17 | 3.12 | 0.00 |
| HKG/CN - US AGGREGATE LANES - USD/KG | ||||
| BID | ASK | VALUE | CHANGE | |
| Nov-19 | 3.58 | 3.70 | 3.64 | 0.00 |
| Dec-19 | 3.33 | 3.42 | 3.38 | -0.02 |
| Jan-20 | 3.32 | 3.45 | 3.38 | 0.00 |
| Q4 19 | 3.46 | 3.54 | 3.50 | 0.00 |
| Cal-19 | 3.42 | 3.52 | 3.47 | -0.01 |
| Cal-20 | 3.55 | 3.65 | 3.60 | 0.00 |
