European Shipping Main Contract Hits Daily Limit for Two Consecutive Days

On October 11th, the main contract of European line consolidation (EC2412) approached its daily limit upon opening, then the increase narrowed, and it was pulled up to the daily limit again near the midday close, with a rise of 19%.

It is worth noting that EC2412 has experienced significant fluctuations recently. On October 8th, it once hit the daily limit during the trading session, and continued to decline on the 9th, but rebounded quickly in the following two days, with consecutive daily limits.

Regarding the significant decline on the 8th, Jia Ruilin, a senior researcher in shipping at Galaxy Futures, explained that the temporary resolution of the strike crisis at the US East Coast ports during the National Day holiday led to a significant drop in the EC market. Except for the EC2410 contract, the decline in other contracts was around 20%.

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Jia Ruilin pointed out that after the temporary agreement was reached, the market's pre-holiday concern that a long-term strike would cause supply chain chaos and raise the transportation price center was temporarily broken. The market pricing was corrected again, and it is expected that the short-term market trading logic will return to the fundamentals.

Why has EC2412 hit the daily limit again in the past two days?

Combining the views of several futures analysts, it may stem from the shipping companies' pricing behavior guiding investor expectations.

In terms of news, CMA (CMA CGM) released the suspension plan for November, and MSK (Maersk) released the November freight rate announcement, targeting a price adjustment to $4,500/FEU (container).

However, analysts have different attitudes towards the above pricing behavior.

Chen Yuhao, a senior researcher at the Research and Development Department of CITIC Construction Investment Futures, believes that the purpose of the price increase in November is more to reverse the pessimistic market expectations formed in September, and more to achieve a stop in the decline and stabilization. There may be some discounts in actual transactions.

Chen Yuhao said that the further pace in the future will depend on the strength of cargo volume support. If the overall strong shipping pace of 2024 is maintained, then the price stabilization increase in November may not be the end.Huatai Futures shipping researcher Gao Cong pointed out that against the backdrop of still relatively large forward shipping capacity pressure, attention needs to be paid to whether this price support can be successful. The December contract has not yet shown signs of a trend reversal and is still viewed with a bearish mindset, but the impact of shipping companies' price support on the market should be guarded against.

Jia Ruilin also pointed out the need to pay attention to the follow-up implementation of price increases. She also stated that looking at the subsequent freight rate outlook, it is expected that the spot freight rates of shipping companies in October will continue to decline overall. In November, the decline in spot freight rates is expected to narrow and stabilize. By the end of the year, with the improvement of cargo volumes and the tacit understanding of shipping companies to support prices during the long-term contract season, freight rates are expected to rebound.

According to Tonghuashun iFind, four shipping sector listed companies have released their performance forecasts for the first three quarters, all of which are expected to increase, including COSCO Shipping, HAITONG Development, COSCO SHIPPING Holdings, and XINGTONG Shares, with the minimum forecasted net profit growth rate at over 50%.

Regarding the reasons for the expected increase in performance, COSCO SHIPPING Holdings explained that in the first three quarters of 2024, the cargo volume in the main markets grew moderately, and the supply of shipping capacity was continuously affected by the situation in the Red Sea, with the global supply chain generally showing a tight situation. In the third quarter of 2024, as the main routes in Europe and America entered the peak season, the company's container shipping business achieved a simultaneous increase in volume and price.