Derivative use of Shanghai Containerised Freight Index 'troubling'

THE value of freight derivatives linked to the Shanghai Shipping Exchange index is being questioned by shippers and carriers who say it uses narrow and flimsy information which threaten rate stability.


French shipping giant CMA CGM's vice president Nicholas Sartini said the freight rate derivative index launched by Shanghai Shipping Exchange in partnership with London's Clarksons is merely a "speculative tool" drawn from a pool of small Chinese forwarders, and does not cater for the wider use of time-charter agreements, the 13th annual Global Liner Shipping Conference was told.


The Shanghai Containerised Freight Index (SCFI) is "plagued with disputable sources of information" Mr Sartini told the London gathering. He also announced his company's refusal to join derivatives along with tyre manufacture Michelin at the conference held by Containerisation International.


It is dangerous because it could accelerate commoditisation of shipping, said Michelin's head of ocean management Jean-Louis-Cambon at the same conference, basing pricing on a single market which does not take into account complexities such as prices based on TEU only rather than with FEU also.


Despite criticism, Clarksons said the index will allow shippers and carriers to hedge exposure to fluctuations in freight rates.


But in placing shipping along a trade route as a single commodity, and therefore single price, it skewers the true picture, said Mr Sartini. "The shipping container market is much more complicated than moving goods from one port to another."
(Source:http://www.schednet.com)