The Shanghai INE EC container freight futures contract, launched in August 2023 and based on the SCFI’s China–North Europe sub-index, gained traction in 2024 as a hedging tool for Chinese and some European forwarders and shippers. However, the start of 2025 has brought renewed concerns about declining freight rates amidst market overcapacity.
A Volatile 2024 and Lingering Overcapacity
Futures contracts began 2024 around 1,850 index points and fluctuated significantly throughout the year, only to return to similar levels by year-end. In 2024, Cape of Good Hope diversions temporarily mitigated capacity surpluses, but these effects are now fully priced into market expectations for 2025.
With more new vessels in operation and additional deliveries underway, market dynamics suggest that overcapacity may not be counterbalanced as it was last year.
Futures Contracts Signal Decline
The nearby February and April 2025 contracts currently trade at 2,065.7 and 1,469.1 points, respectively—25% above March 2024 lows, but significantly below peak levels. Long-dated contracts for October and December 2025 have settled at 1,276.6 and 1,343.7 points, approaching their lowest levels in 12 months.
The general rate increase (GRI) at the end of 2024 briefly elevated futures prices, but from December onward, doubts about carriers’ ability to sustain higher spot rates have pushed prices downward.
Challenges in Sustaining GRI Impact
While an early Lunar New Year and tariff threats initially supported GRIs by encouraging frontloading, their effects have now dissipated. The opportunity for carriers to hedge higher rates—such as locking in October 2025 rates at 1,750 points (or approximately $2,800/FEU)—has diminished, with current expectations closer to $2,000/FEU.
Rates for the October 2025 contract have fallen by over 5% since January 1 and more than 22% since December 1, 2024. Compared to January 2024’s forward curves, the expected price level for 2025 is already 500 points lower, indicating continued pressure on freight rates.
Outlook for 2025
Unless major disruptions to global supply chains occur, the futures market anticipates a steady decline in freight rates throughout 2025. While this provides potential relief to shippers after a volatile 2024, it presents significant challenges for carriers seeking to maintain profitability in an increasingly competitive environment.