China has made a new attempt to create a container shipping futures product, listing the Containerized Freight Index Futures (Europe Service) on the Shanghai International Energy Exchange on Friday.
The Chinese government aims to enable hedging in container shipping and boost its influence in international transport.
Denominated in Chinese yuan, the futures are based on the Shanghai Containerized Freight Index’s settled rates and open to investors worldwide.
Upon contract expiration, open positions of the futures will be closed by calculating the profits and losses at the final settlement price and settling them in cash.
Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, said at the listing: “The exchange should guide businesses to use futures to manage risks. We hope liner operators, freight forwarders and cargo owners will make use of futures as a hedging tool.”
Overall, 369,000 lots of futures products were traded on Friday, with a turnover of CNY16.56bn ($2.27bn). Those that traded included Worldwide Logistics, Ningbo Port Southeast Logistics Group, Mercuria Asia Resources and Bank of China International Global Commodities.
Linerlytica analyst Tan Hua Joo told that interest in container freight derivatives in China far exceeded that in any other part of the world.
He said: “It certainly makes sense to launch such a product. However, the exchange will need to avoid the same mistakes that the Shanghai Shipping Freight Exchange made with its freight futures platform that was launched in 2011.
“Trading volumes dried up after initial interest waned. Futures contracts for that product were settled on Shanghai Containerized Freight Index figures, which were not based on actual moving rates.”
Tian Xiangyang, chairman of the Shanghai Futures Exchange, parent of the Shanghai International Energy Exchange, said demand for risk management tools had risen in China as the freight market became increasingly volatile.
Mr Tian noted that the launch of the futures product coincided with China overtaking Greece as the world’s largest ship-owning country, with tonnage of 249.2 million gross tonnes.
