Clearing house European Energy Exchange (EEX) has rolled out a new handysize product on back of record volumes of dry bulk futures business.
The Deutsche Borse subsidiary handled record levels of dry freight futures in the first quarter of the year, boosted by its highest ever monthly volume in March.
Volumes rose 67% to 314,000 lots in the first three months of the year, up from 187,000 lots in the first quarter of 2020.
That was helped by a record 122,544 lots traded in March , some 35% higher than the same month of last year.
The rise mirrored growth in whole of the dry freight futures market, which was 56% higher in the first quarter at 778,000 lots, from 498,000 in the first quarter of 2020.
The increase was partly driven by new counterparties entering the market, with the EEX alone registering 12% more participants in the quarter, said Richard Heath, EEX’s head of global commodities.
"It’s not just more churn because of volatility, it's a genuine increase in growth in the market," he said.
Handysize product launched
On Monday, EEX starts clearing forward freight agreement (FFA) contracts based on the Baltic Exchange’s 7TC route for 38,000-dwt handysize bulkers.
That pits the company against the rival Singapore Exchange (SGX), which previously confirmed 19 April as the start date for clearing handysize FFA’s.
The Baltic Exchange expanded its benchmark for 38,000-dwt handysizes in March 2018, but there were no paper trades last year because the derivatives were neither brokered nor being cleared.
It was previously based on the Baltic Exchange’s old 28,000-dwt benchmark, and even then the paper was thinly traded.
But an update to the handysize contract was needed to help participants manage exposure and clear business in the FFA trades, said Heath.
"There’s been a lot of demand from our clients for this contract," he said.
"Over 60% are already trading the supramax and many of those have said that a lots want the handysize as well.”
EEX currently clears trades for capesize, panamax and supramax contracts.
Companies like Norden, Oldendorff, Ultrabulk and J Lauritzen have also expressed a potential interest in handysize FFAs, as has major charterer Cargill.
In the physical market, handysize rates are trading at historic high.
The 7TC weighted-average spot rate was assessed at $18,101 on 16 April, down from a peak close to $25,000 per day in mid-March, but significantly up on levels below $5,000 per day this time last year.
