The Baltic Exchange has arrived in Shanghai to prevent “fragmentation” of its flagship index products.
Baltic chief executive Jeremy Penn was this week accompanied by the heads of Maritime London to mark the opening of the exchange’s new China office under Baltic chief China representative Marcus Lee (Li Xianming).
Penn thinks it will be dangerous for the world market if the Baltic yields ground to competing indices, although he prefers not to mention competitors by name.
“Fragmentation damages everyone,” he told TradeWinds after the reception in honour of his Chinese beachhead.
“It would be damaging to liquidity in FFAs [forward-freight agreements] and it would be expensive for the physical market.”
Indicators of success for the Baltic’s China initiative would be offensive as well as defensive — with growth and the preservation of the Baltic’s dominance the goal.
“As measures of success, I would want to see more Baltic members in China, and I would like to see more companies in China trading FFAs — whether renminbi-denominated FFAs or dollar-denominated ones — the kind we traditionally think of as FFAs,” said Penn.
“But I would like to make sure that we maintain the consensus around Baltic rates that exists today both in physical and futures markets.”
Global unity of a kind is what the Baltic has to sell, and it no longer seemed possible to sell it from afar.
“The key thing about the Baltic is that it draws together the world shipping market,” Penn said. “Having an office here ensures that we understand the needs of the Asia and Pacific regions and specifically of China. It also sends the message that we’re not stuck in London and unable to respond to those needs.”
The Baltic was formerly represented in Shanghai through Seamaster Shipbroking and Penn says that, as a member and also a business partner, Seamaster was able to make a connection with other Chinese brokers. “But that was not the same as having a presence of our own,” he said.
Some Chinese brokers question the need for a Chinese-language version of the Baltic’s products, but Penn finds it fitting to approach users in their own language.
“I think the lingua franca of shipping is unquestionably English and we rely on English for most of what we do. But it’s also important for us to connect with people on the fringes who are just beginning to engage with us.”
He added: “It would be extremely discourteous to come to a sophisticated major world economy and assume that they should speak your language rather than their own. That would be quite wrong.”
