- Container forward freight agreements offer protection against the heavy volatility of freight rates in ocean transport
- Container importers, logistics companies and liner shipping com-panies benefit in equal measure
- Already high level of acceptance and sharp rise in demand
- Focus on Hamburg for innovative derivatives for the container shipping sector – CFDA Global Container Freight Forum at HSH Nordbank on 17 January
HAMBURG/KIEL Whereas it has long been a widespread practice to hedge currency risks at companies operating on a global scale, hitherto the market has failed to offer any compa-rable possibility of hedging freight rate risks in container shipping. Yet container transport is prone to a high level of volatility, which represents a considerable economic risk potential for container importers, logistics companies and liner shipping companies.
On the basis of its many years of experience in shipping, HSH Nordbank is offering an innovative instru-ment for reliable planning with regard to future freight rates: container forward freight agreements (FFA) – forward transactions separate from the freight contract – make it possi-ble to fix future freight rates up to two years in advance. The basis for freight rate hedging is the globally recognised Shanghai Containerized Freight Index (SCFI). The SCFI shows the current market price for freight rates on the basis of transactions actually conducted, trans-parently, thereby making it possible to fix prices efficiently.
“To date there have hardly been any long-term and sustainable supply contracts due to the high level of volatility prevailing. This means that it is virtually impossible to make reliable calculations. For example, over the past twelve months the spot rates for the Asia-Europe route initially almost tripled before dropping again by almost a half. The interest of our clients in hedging this risk is correspondingly high, ” says Dr. Dirk Reiche, Head of Products at HSH Nordbank. “Using FFAs makes it possible to limit the freight rate risk. Both importers and liner shipping companies benefit from the advantages of this hedging instrument in equal measure.”
This Thursday Hamburg will become the international focus for innovative risk manage-ment solutions in container transport. The prestigious specialist conference organised by the CFDA Container Freight Derivatives Association is to be held at HSH Nordbank on 17 Janu-ary. Further information on the programme can be found under www.cf-da.com.