A landmark futures deal is paving the way to make freight-rate risk more manageable in boxship markets, following the closing of the first-ever container derivatives trade on the Singapore Exchange on Tuesday.
The deal was brokered by Braemar Securities, the freight forward agreements (FFA) desk of Braemar Shipping Services group, and was cleared by the Singapore Exchange (SGX).
An unnamed US investment bank sold its June contract for the China/East Asia to northern Europe route at $5,650 per feu, one of the benchmark routes that make up the Freightos Baltic Index (FBX) for container freight.
The contract was bought by US-based commodity trading adviser Pillar, which provides an automated hedging service for small and medium-size enterprises.
Harsha Ramesh, Pillar’s co-founder and president, said: “At Pillar we’re excited to now harness the container FFA markets to offer our customers engaged in import and export protection against surging container freight rates.”
Container spot rates across the board have proven volatile during 2024 to date. Freight rates on the China-northern Europe benchmark route have jumped up over the past month, rising by just over 50% to $4,977 per day on Tuesday.
Sander Bots, managing director of Braemar Securities, said his firm was “thrilled” to have brokered the historic trade.
“This achievement underscores our commitment to innovation and excellence in the maritime industry. We continue to drive positive change and provide value to our clients,” he said.
Peter Stallion is Braemar Securities’ container FFA broker.
Baltic Exchange chief executive Mark Jackson said the landmark trade was timely as the container sector looks for new ways to hedge its exposure to volatile rates “during periods of instability”.
“The first FBX FFA trade on SGX, done by Braemar, is a significant step forward in providing the same level of certainty to the container freight market, particularly as it faces increased volatility amid ongoing geopolitical risks and port congestion in key hubs,” Jackson said.
This year to date has seen other world-first trades in the FFA space.
In early March, Clarksons brokered the first 174,000-cbm LNG FFA trade on the Chicago Mercantile Exchange.
