ship chart © Ml12nan
© Ml12nan

The bellwether Shanghai Containerized Freight Index (SCFI), which has found prominence in the trend in container liner shipping from long-term contract to short-term and spot business, is facing a challenge from an index audited by the Baltic Exchange.

London’s Baltic Exchange, which was acquired by the Singapore Exchange in 2016, has teamed up with online freight rate benchmarking platform Freightos to launch a global container freight index covering the major tradelanes of the world.

The FBX Global Container Index (FBX) will record weekly spot rates for 40ft containers on the weighted average across 12 main shipping lanes, based, it is claimed, on 12-18m data price points collected each week.

Baltic Exchange chief executive Mark Jackson said: “Baltic Exchange benchmarks are already widely used as settlement mechanisms in the derivatives and physical markets for billions of dollars-worth of bulk freight transactions. Our products have allowed shipowners, charterers and traders to manage the volatile business of moving bulk commodities by sea.

“By offering our robust auditing methodology to the FBX, we hope to provide the framework for the container shipping industry to develop sophisticated risk management tools.”

The FBX’s 12 components will record spot rates inclusive of all surcharges, such as bunker, currency and peak season, and will be on a rolling short-term FAK (freight all kinds) basis gleaned from information supplied by carriers, freight forwarders and high-volume shippers.

The FBX will be published on Sundays, reflecting the spot prices of the previous week, and will be free to subscribers via the Baltic Exchange website, the Freightos website and on Thomson Reuters Eikon screens.

The index will be audited and compliant with the International Organisation of Securities Commissions (IOSCO) and the European Securities and Markets Authority (ESMA).

Freightos founder and chief executive Zvi Schreiber said: “We are incredibly proud to drive more efficiency to the container freight market and cannot think of a stronger partner than the Baltic Exchange and the Singapore Exchange. We are looking forward to the future financial instruments that this index unlocks.”

The SCFI was formed in 2005 by the Chinese government and particularly since the ending of the EU anti-trust immunity for shipping lines in 2008 has become the main reference point for the industry.

Indeed, Maersk Line includes a reference to the SCFI in its annual reports, but in earlier years it viewed the index as a “casino”, preferring to concentrate on its more lucrative contract business.

However, carriers on the main east-west routes, for example, now book more than 50% of their containers on a spot or short-term contract basis, making the SCFI an important benchmarking tool.

As its name suggests the SCFI is based on the export price on containers moving from Shanghai compiled by the data supplied by shipping lines.

The CCFI (China Containerised Freight Index) on the other hand is a much broader index based on the prices of containers moving from all the major ports in China and is a composite of both spot and contract rates.

The move follows Monday’s news that Freight Investor Services (FIS) has partnered with The Air Cargo Index (TAC Index) to offer airlines, forwarders and end users the means to flexibly price air cargo contracts and to hedge their exposure using cleared financial futures contracts. Using the market-neutral TAC Index, FIS will publish a forward price curve, helping market participants with forward planning and budgeting, allowing them to better forecast expenditure and manage budgets effectively while also gaining more flexibility.

Buyers and sellers of cargo space will be able to improve price discovery on physical fixed rate contracts, strike index-linked floating block space agreements and use air cargo FFAs to lock in prices.

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  • Elinor Parker

    July 14, 2020 at 4:37 am

    Can I buy shares in Freightos?