Executive Briefings

Drewry, Cleartrade Launch Global Container Rate Index They Say Will Manage Freight Risk

Drewry Shipping Consultants and Cleartrade Exchange have unveiled a global index of freight rates they say can be used by physical and derivative market participants to manage freight risk. The index, called the "World Container Index assessed by Drewry," will report individual market prices on major east-west container shipping routes. Initially, prices for 11 individual routes and a composite index will be reported each week. These will cover trade in both directions between Asia, North America and Europe.

"We estimate the physical volume in 2010 on these 11 routes was 37 million 20-foot container moves. The potential for hedging and trading that freight risk is obvious," said Richard Baker, managing director of Cleartrade, an electronic marketplace for over-the-counter freight and commodity swaps.

Brian Nixon, president of the Container Freight Derivatives Association in London, welcomed the new World Container Index. "The association is on record as saying that its members support the development of new indices which are seen by the market to be fair, trustworthy and transparent. The development of these new indices by the WCI should bring new trading and hedging strategies along with increased liquidity to market participants wishing to manage their risk on a specific route and index."

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Drewry Shipping Consultants and Cleartrade Exchange have unveiled a global index of freight rates they say can be used by physical and derivative market participants to manage freight risk. The index, called the "World Container Index assessed by Drewry," will report individual market prices on major east-west container shipping routes. Initially, prices for 11 individual routes and a composite index will be reported each week. These will cover trade in both directions between Asia, North America and Europe.

"We estimate the physical volume in 2010 on these 11 routes was 37 million 20-foot container moves. The potential for hedging and trading that freight risk is obvious," said Richard Baker, managing director of Cleartrade, an electronic marketplace for over-the-counter freight and commodity swaps.

Brian Nixon, president of the Container Freight Derivatives Association in London, welcomed the new World Container Index. "The association is on record as saying that its members support the development of new indices which are seen by the market to be fair, trustworthy and transparent. The development of these new indices by the WCI should bring new trading and hedging strategies along with increased liquidity to market participants wishing to manage their risk on a specific route and index."

Read Full Article