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The first container futures market trade took place this week, with 120FEU sold at $7,900/FEU on Asia to Europe, following the launch of the Freightos Baltic Exchange’s futures market on 28 February.
The $948,000 deal was facilitated by Freight Investor Services (FIS) brokerage firm on CME Group’s Nymex exchange, bringing the container derivatives market into line with the dry and liquid bulk markets, which have been operating a futures market since the early part of this century.
According to FIS container broker Peter Stallion: “These futures come at an opportune time, with initial trading almost entirely focused on hedging. We’ve seen interest from a wide array of counterparties, including ocean liners, freight forwarders, shippers and financials – our job will be to grow the volumes in the market and develop a mechanism the market can rely on.”
Growth in the marketplace will be critical in the months ahead, with former Barclay’s analyst Mark McVicar saying that without depth, futures markets are poor indicators of what is happening in the physical world.
Nevertheless, Mr McVicar told The Loadstar: “With carriers now offering longer term contracts, up to about two years, this will allow shippers and forwarders to move away from the spot market by using the index as a guide in prices.”
However, he emphasised that for the index to have a meaningful impact, it will need “time for people to adapt and to use the market, and it will need volume through the market to take away the impact of any ‘odd trades’.”
A spokesperson for FIS said that the container futures market is too new for the group to assess who is trading, but typically, in the bulk market some 25% of traders are financiers – speculators looking to profit on the volatility of freight rates. The bulk markets are, however, dominated by physical players and FIS expects a similar breakdown in container futures trading.
While the speculators will be taking a financial risk on the future level of freight rates, FIS said that those involved in the industry, including shippers, carriers and freight forwarders, will benefit from the certainty that the futures market will bring.
Zvi Schreiber, CEO of Freightos said: “Containerised shipping rates are more volatile than ever, which disrupts world trade… Today the industry has taken the critical next step of adopting modern financial tools which allow importers/exporters, forwarders and carriers to protect themselves from the brutal unpredictability of containerised shipping prices, by trading futures contracts based on FBX.”