February futures set the tone for 2025

After what seemed like a positive start into the new year, the INE container freight futures market quickly reversed course and turned decidedly negative, with prices falling across all contract months since January 3. After the decline briefly slowed down on Tuesday, it continued today, with contracts from April to December 2025 all losing between 4-8%. February performed a bit better, giving up a mere 1.77%.

But the February contract has been in a steady decline since December 18, and it is trading far below its last peak of 3324.8 points on November 20. YtD, the contract has lost 12.2% so far after settling at 1991.5 points today.

With no sign of support, the contract is now trading below 2000 points for the first time in two months, indicating that the market sees spot rates in the low $3000/FEU range throughout February. As newbuild capacity continues to grow and we still have no sign of blank sailings, we can expect further declines until carriers decide to take action.

The April contract seemed to have found a support level at around 1600 points in mid-December, but since January we've see a steady inflow of new positions, coupled with a steep decline in prices. The contract went from a high of 1722 points on January 2 to a low of 1390.4 today; this marked the first time the contract traded below 1400 points since early October. The April contract never traded below 1500 points in 2024 until August 19, after which it briefly hit 1066 points in September before rebounding to over 1500 points later that month.

This is broadly reflective of the overall market performance of the contract, and even the late 2024 GRI push failed to move the far end of the forward curve higher. In fact, after a brief success in mid-November, the entire forward curve fell back almost exactly to its September level. The outlook for the rest of 2025 is now noticeably lower than in January last year, with the front month in a backwardation but the rest of the forward curve relatively flat.

Overall, looking back at 2024 it's been a volatile 12 months, but when setting aside the Q3 capacity crunch and year-end GRI, futures have actually moved very little, as the underlying question remains the same: at what point will capacity additions drive down rates even as the Red Sea blockage forces continued Cape diversions? Looking at the current direction of the futures market, it seems like the answer is "right about now"...

In their quest to attract more market participation by industrials, the Chinese exchanges recently announced a number of policies for 2025 to support industrial users of their futures contracts, including discounts and cuts to delivery, brand registration and other physical delivery fees. Most notably, the INE announced a 50% cut to their exchange trading fees for hedging trades, which would also apply to the INE EC freight contract. This would cut hedging fees from ~USD 2/FEU to less than USD 2/FEU.

For more futures market news, you can follow my colleague Matt Huang, our Head of Research, on LinkedIn to receive daily market updates or message me if you would like to have a chat or exchange views.

Our partners at Linerlytica recently launched a regular in-depth INE EC market update with plenty of additional detail and insights into what's happening on the China-North Europe route. Their latest EC market update is available here: https://www.dhirubhai.net/posts/johnson-leung-277674_weekly-ec-market-pulse-activity-7282610959385276416-3Yv6?utm_source=share&utm_medium=member_desktop

Best regards,

Vincenz