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CME container freight futures to use FBX rates

Six daily Freightos Baltic Index (FBX) indices managed by the Baltic Exchange will be used for the settlement of CME Group’s new shipping container freight futures. 

CME container freight futures to use FBX rates
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Photo by CHUTTERSNAP on Unsplash

December 17, 2021: Six daily Freightos Baltic Index (FBX) indices managed by the Baltic Exchange will be used for the settlement of CME Group’s new shipping container freight futures.

The new contracts will be priced in $/FEU and will launch on February 28, 2022 with the first contract month for trading of March 2022, pending regulatory review.

“The Baltic Exchange is an independent, trusted body with deep experience of managing complex benchmarks for the shipping industry," CEO Mark Jackson said. "Our freight benchmarks already underpin a liquid market for dry bulk and tanker shipping, and we are excited by the prospect of the development of a which plays such a significant role in moving global trade.”

The move will help importers and exporters, forwarders and shipping lines, impacted by volatile ocean container rates, to mitigate their freight price risk. The futures launch follows a year of record volatility, driven by bottlenecks and container equipment shortages, which saw China-U.S freight rates fluctuate rapidly between $4,222/FEU and $20,586/FEU, the statement added.

“Container shipping is the foundation of world trade but the industry has long suffered from lack of transparency and flexibility," said Zvi Schreiber, CEO, Freightos, "We are excited that container shipping will now join other industries in adopting flexible index-linked pricing with financial instruments to hedge pricing risk. FBX futures will help global supply chains to cope with unprecedented demand and new levels of volatility driven by the pandemic.”

The FBX indices are authorised and regulated by the Financial Conduct Authority. The contracts will be listed by and subject to the rules of NYMEX.

The listed contracts will be:

FBX 01

China/East Asia to US West Coast

FBX 02

US West Coast to China/East Asia

FBX 03

China/East Asia to US East Coast

FBX 11

China/East Asia to North Europe

FBX 12

North Europe to China/East Asia

FBX 13

China/East Asia to Mediterranean

The rates used for the indices are rolling short-term Freight All Kind (FAK) spot tariffs and related surcharges between carriers, freight forwarders and high-volume shippers.

"The listing of cleared contracts will bring in crucial liquidity providers, allowing us to drive forward more trading and help ocean liners, ship owners, freight forwarders and shippers manage their future price risk," said Peter Stallion, Container FFA broker at Freight Investor Services (FIS) which has pioneered this market.

Around 815 million TEUs were handled in ports worldwide in 2020, according to United Nations Conference on Trade and Development (UNCTAD) while US container imports in 2021 are likely to be the highest since 2002 and over 18% higher than 2020, according to the National Retail Foundation.

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