Sellers revive box swaps, declare 5 lines show 'strong interest'

THE freshly minted Container Freight Derivatives Association (CFDA), marketing their new-concept box swaps, have declared that five container lines have shown "strong interest" though only Chile's CSAV has admitted to buying any while other shipping lines have spoken against them.

Another swap buyer, London shipping consultant and the world's biggest shipbroker, Clarkson Plc, executed its first swap settled against the Shanghai Containerised Freight Index in January.

It was earlier reported that the first swap was traded in January between Morgan Stanley and shipowner Delphis. Trades are based on the Shanghai Shipping Exchange's Shanghai Containerised Freight Index, which, sellers say, provides opportunities to hedge freight rates on major container routes from China.

The claim of widening shipping community interest was made by CFDA president Brian Nixon, also an executive director at Morgan Stanley, when talking to Bloomberg News in Shanghai after the group's first annual meeting. But Mr Nixon refused to identify the five shipping lines.

Container derivative dealers hope that today's tiny trade in box contracts will one day approach the US$31 billion in dry bulk cargo derivatives traded last year based on tracking London's Baltic Dry Index.

In container shipping, contracts covering a few thousand boxes will likely be traded worldwide in the fourth quarter, Mr Nixon said, adding that it might reach two million a year on Asia-Europe routes in five years.

The Shanghai Shipping Exchange's weekly index takes data from 30 lines and forwarders and averages out spot rates for shipments to Europe, the Mediterranean and the US.

Viewed as a method of hedging against the volatility of freight rates, derivatives track the index, devised as a benchmark for container shipping costs. Box rates are harder to track than commodities because containerships carry a variety of cargo for many customers while bulk ships carry a single cargo for one customer.

What little shipping lines have said about container derivatives has been negative. "We don't seem to need the product," said China's "K" Line marketing chief Li Hongmei.

Cosco and China Shipping Container Lines, two of the biggest Chinese box lines, said they have no plans to enter the market.

Hong Kong's Orient Overseas Container Line (OOCL) said the market is of doubtful value with corporate planning chief Stephen Ng saying swaps were "not beneficial". This follows a similar lack of interest from Maersk, APL and Zim.

Mr Ng said OOCL felt "one rate for all" was not feasible in container shipping despite claims that swaps useful as a risk management tool.

Neptune Orient Lines' (NOL) president Eng Aik Meng told London's Lloyd's List that it would not participate. "The problem with a lot these things is that it becomes not so much a commercial instrument but a financial instrument," he said.
(Source:www.schednet.com)