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Sea Freight Prices Rise, The Industry Expects Container Capacity Futures To Ease The Container Worry

May 24 2023

Since the beginning of this year, the price of my country's export container shipping capacity has risen sharply, and relevant domestic enterprises are facing the test of price risk. Industry insiders said that my country is the world's largest shipping country, but it still lacks the matching shipping price influence. At present, relevant domestic futures exchanges are promoting the research and development of shipping derivatives. After listing in the future, it is expected to provide accurate freight risk management tools for the upstream, midstream and downstream industry chain of shipping. At the same time, it can further enhance the influence of RMB in shipping pricing and international trade settlement. It can better serve my country’s development strategy of comprehensively deepening opening up.

Calls for listing of container capacity futures are high

Affected by factors such as strong demand in foreign markets, pick-up in import and export trade, and relatively tight container capacity, the price of my country's export container capacity has risen sharply this year.

The latest export container freight index released by the Shanghai Shipping Exchange shows that as of June 18, the China Export Container Freight Index (CCFI) reported 2526.65 points, a record high; it was up 84.08 points, or 3.4%, compared to a week ago. ; Compared with last year's lowest point of 834 points, a cumulative increase of 203%.

According to industry insiders, rising shipping prices also make domestic companies in the shipping industry chain face the test of price risk, and there is a strong demand for hedging. In this context, the market calls for the listing of container capacity futures.

An industry expert pointed out in an interview with a reporter from the China Securities Journal that after the listing of container capacity futures, it will provide accurate freight rate risk management tools for the upstream, midstream and downstream shipping industry chain. Specifically, downstream export trading companies, as buyers of capacity, can hedge against the risk of rising freight costs through futures hedging and avoid loss of profits; upstream shipping companies, etc., as sellers, can lock in sales prices in advance through container capacity futures to lock in profits ; Midstream freight forwarders can also hedge their spot space positions to avoid the loss of revenue caused by freight rate fluctuations.

According to public data, my country is the world's largest shipping country. In 2020, the national port cargo throughput will be 14.55 billion tons, and the port container throughput will be 260 million TEUs. The port cargo throughput and container throughput are both ranked first in the world. Among the top 10 ports in the world in terms of container throughput, my country occupies 7 seats. "Nevertheless, my country still lacks the influence of freight rates that match the scale of trade. It is urgent to launch container capacity futures that can reflect the actual supply and demand relationship of my country's shipping to serve my country's development strategy of deepening the opening up. Container capacity denominated in RMB Futures can also further enhance the influence of the renminbi in shipping pricing and international trade settlement, and help the renminbi’s internationalization process.” said the above-mentioned expert.

Different from overseas shipping derivatives

It is reported that the domestic futures market is accelerating the development and listing of shipping futures in order to manage price risks for upstream and downstream shipping companies. Among them, DCE's container capacity futures project was completed in 2019, and the current contract system design plan has been basically completed. Recently, DCE and COSCO Shipping Group signed a strategic cooperation agreement in Shanghai. The two parties will carry out in-depth cooperation in the development and application of shipping derivatives such as container capacity futures, the establishment of futures delivery warehouses and designated institutions, and the deep integration of physical delivery and modern logistics services.

In fact, there are many shipping derivatives in the current international market. According to the latest interest rate, the Baltic Shipping Exchange has launched BDI-based forward freight swap products, and the New York Shipping Exchange in the United States has also listed an ocean container shipping forward agreement, with relatively limited trading volume and liquidity. What is the difference between the container capacity futures being developed by DCE and the existing overseas shipping derivatives?

A reporter from China Securities News learned during the interview that there are two major differences between the container capacity futures under development and the existing offshore shipping derivatives:

One is the difference in transaction targets. The existing overseas shipping derivatives are mostly positioned in the dry bulk and tanker markets, while my country's container shipping accounts for about 90% of export trade, and is the main carrier of my country's export trade. DCE is positioned in the container capacity market, with the price of container capacity exported from China to the West as the subject of the transaction to reflect and reflect the current situation and demands of my country's market.

The second is different delivery methods. Existing overseas shipping derivatives are all delivered in cash. Dashang adopts physical delivery, and the delivery is the container capacity of China’s export to the US West route in the unit of TEU. This will be the world’s first physical delivery container capacity under development. futures. The physical delivery system can effectively promote the return and convergence of future prices in the immediate delivery month, and guarantee the hedging effect.

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