Singapore Exchange (SGX) has added four new forward freight agreement (FFA) and futures contracts in the capesize and handysize segments on April 21.
The exchange is the largest clearing venue for dry bulk freight globally with over 60% in terms of market share.
Nearly 500,000 SGX FFA contracts changed hands in the 1QFY2021, up 50% y-o-y. The figure marks a record pace amid the rebound of the dry bulk market, buoyed by an economic resurgence in China since the beginning of the year.
The new launches offer participants more precise hedging tools for clients looking to manage their freight risk from Brazil, the second largest iron ore producing country. They will also complement SGX’s high grade 65% iron ore contracts, which have seen “robust activity”.
The new SGX Baltic Handysize Time Charter (7 Routes) Futures/FFA and SGX Baltic Capesize Voyage C3 Futures/FFA reference the Baltic Exchange’s 38,000-dwt handysize and Brazil-China C3 capesize benchmarks, respectively. The new launches commenced trading on April 19.
About 20 contracts of the SGX Baltic Handysize Time Charter (7 Routes) FFA have been traded since.
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The inaugural trades were brokered by SSY Futures, the world’s largest independent shipbroker.
Handysize vessels ship a diverse range of cargoes and are widely seen as a barometer for the dry bulk cargo market.
According to SGX, the Brazil to China route reflects demand for Brazilian iron ore from China, which is the world’s largest importer of iron ore.
“This is an opportune time to be expanding our FFA product suite offering. Against a backdrop of ongoing Covid-related disruptions and a recovery of industry activity that is set to continue, we are seeing strong interest from market participants for more precise shipping risk management tools,” says William Chin, head of commodities at SGX.
“Together with the Baltic Exchange, we have been deliberate in building FFA liquidity blocks that benefit the maritime community and better meet the needs of our shipping, iron ore and commodity clients,” Chin adds.
“The handysize market is an important, active dry bulk segment with a wide variety of active owners and charterers. We have seen significant interest from market participants in trading a smaller vessel type and will continue to support the development of this market with independent, regulated, daily assessments,” says Mark Jackson, CEO of the Baltic Exchange.
Shares in SGX closed 6 cents lower or 0.6% down at $10.41 on April 21.
