The companies believe FBX will set the stage for future derivative financial instruments.
The Baltic Exchange and Freightos said Wednesday that they have created a new container freight index.
The Freightos International Freight Index will reflect weekly spot rates for 40-foot containers based on 12 million to 18 million price points collected every week on a dozen main shipping trade lanes by Freightos.The rates will be audited by the Baltic Exchange and republished as the Freightos Baltic Indices.
The companies will also create a weighted average of the 12 underlying route indexes to be called the FBX Global Container Index (FBX), that they said is “setting the stage for derivative financial instruments in the future.”
The Baltic Exchange already provides daily assessments for the dry bulk, tanker and gas freight markets that are used widely in both the physical shipping markets and to settle Forward Freight Agreements (FFAs). The Baltic Exchange, which is headquartered in London and traces its roots back to 1744, was acquired by the Singapore Exchange in 2016.
Baltic Exchange Chief Executive Mark Jackson said, “By offering our robust auditing methodology to the FBX, we hope to provide the framework for the container shipping industry to develop sophisticated risk management tools.”
The FBX is the latest in a series of freight indexes that have been created for the container shipping industry.
The most well known are those created by the Shanghai Shipping Exchange, which include the Shanghai Containerized Freight Index, which is published weekly and is based on spot rates for containerized export cargo from Shanghai to 13 ports around the world. The current index was issued in 2009, and replaced an earlier index created in 2005. The Shanghai Shipping Exchange also publishes the weekly China Containerized Freight Index, which is based on both contract and spot rates on 12 routes out of China.
London-based maritime consultancy Drewry in 2011 began publishing its own World Container Index, which measures spot market rates on eight major routes in the Asia-Europe, transpacific and transatlantic trades, and the Baltic Exchange back in 2015 created an index with the Ningbo Shipping Exchange that aggregates outbound rates from Ningbo to North Europe, the Mediterranean and the Middle East.
Platt’s, a subsidiary of S&P Global also publishes a container index.
Zvi Schreiber, the founder and CEO of Freightos said his company’s technology and database of multimodal freight rates “already power both market intelligence and real-time freight booking and management for over 1,000 carriers and forwarders, as well as over 3,000 shippers.”
He said the company is “looking forward to the future financial instruments that this index unlocks.”
It’s long been hoped that derivatives based on container freight rates might be a useful way for shippers to protect themselves from wildly fluctuating freight rates.
Philip Damas, head of Drewry Supply Chain Advisors, says his firm “believes that hedging and futures will eventually happen in container shipping despite the failed attempts in 2010-12, although nobody knows when these new tools will take off.”
He said Drewry thought it was “the wrong approach to introduce yet another container freight rate index as there are too many indices already.”
“We are looking for standardization and consensus on a single index and Drewry is talking to several stakeholders to achieve that,” he said.
The FBX Global Container Index will be based on the following shipping lanes and includes both headhaul and backhaul routes:
• FBX01: China/East Asia to North America West Coast;
• FBX02: North America West Coast to China/East Asia;
• FBX03: China/East Asia to North America East Coast;
• FBX04: North America East Coast to China/East Asia;
• FBX11: China/East Asia to North Europe;
• FBX12: North Europe to China/East Asia;
• FBX13: China/East Asia to Mediterranean;
• FBX14: Mediterranean to China/East Asia;
• FBX21: North America East Coast to Europe;
• FBX22: Freightos Europe to North America East Coast China/East Asia;
• FBX24: Europe to South America East Coast;
• And FBX26: Europe to South America West Coast.
Baltic Exchange, Freightos create container freight index
