The pros and cons of hedging ocean freight rates

15/08/2012

“You’ll need curiosity, education and patience.” This informative piece looks at how hedging can be used beneficially with an ocean freight index – but it also points out the potential pitfalls, which include choosing the right index, overcomplicating and the impact of speculators.

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Yvan
August 15, 2012 at 2:38 pm
Good article . I do not agree with the below statements though:
“After all, the notion of a service contract in the ocean-going container trades has become something of a joke. Carriers routinely raise rates or refuse cargo moving under contracts, and shippers often fail to meet their volume commitments”
and
“A fixed contract with no hedge is ineffective in a volatile market”
I do not agree because this is simply not what I am experiencing and I also believe that this is not what a lot of shippers are experiencing. I never had a contract re-opened before the agreed period.
I can even confirm that carriers usually do not forget when you remain loyal to their service contract even when the spot market collapses. This usually means space protection when things get hot.
And although we do have some occasional challenges on space, it is nothing significant enough to conclude that the agreement has not been respected. Actually if I have a look at the way the indexes behaved so far, shippers with competitive fixed rates have saved money.
Now if we talking of small SMEs struggling to get their agreement respected with the lines then its another story.

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