OOCL gains market share in Q1, with 'very strong' financials unveiled by Cosco
Volumes carried by Cosco-owned container line OOCL in the first quarter soared, compared with the ...
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Lack of investment, rate volatility and low transparency are leading some players in the air freight industry to consider the introduction of a derivatives trade.
In a presentation at the World Cargo Symposium in Doha, Eric Hasham, head of market development for NYSE Euronext, argued that the industry could only benefit from creating a commodity index which allowed trades in forward contracts.
“Indices play an important role for companies seeking forward planning certainty around prices, by allowing, for example, industry players to ...
Comment on this article
Michael Kusuplos
March 26, 2013 at 11:14 pm” Such selling can enable companies to more reliably project future revenue streams and earnings. Such pre-sold revenue streams can even be used, in some cases, to finance asset purchases.”
If there is anyone out there that believes that this type of action would not have any adverse impact on our industry, I’d like to meet them. Why you ask? I have a couple bridges for sale that I’d to interest them in! Beware of those selling Snake Oil!
Alex Gray
March 27, 2013 at 9:32 amWhilst your well-researched and balanced article quotes an unnamed sea freight buyer as having a negative view of risk management, the likelihood is that he or she benefits from the use of derivatives wherever they look; From mortgage payments to supermarket pricing, from the cost to fill the car with petrol to their electricity bill, derivative usage is evident everywhere every day.
Uptake of derivatives by those exposed to the container freight market may be slow but this is an industry going through considerable change. The Shanghai Containerised Freight Index (SCFI) is the most commonly quoted reference point in container freight pricing and the number of contracts that now use this index as a pricing mechanism for index-linked contracts on container movements is growing rapidly.
Having been the innovators of the dry bulk, tanker and container freight derivatives products, we have identified that the process of index linked contracts is an important first step. It is only when this platform of trust and reliability is established that a vibrant and effective derivatives market can emerge.
The “optionality” which has been an enduring feature of the performance of both carriers and sea freight buyers since the inception of the container industry will eventually be entombed in history books – together with the comments of your sea freight buyer. The message to the air freight industry is a clear one; establish an index and don’t be diverted by those with a vested interest in opacity.