The Containerized Freight Index (Europe Service) Futures Contracts was listed for trading, according to the Shanghai International Energy Exchange (INE). The futures reflect freight rates for containers shipped from Shanghai to European ports with the aim to help firms hedge against fluctuation risks in container freight prices. They will be the first shipping futures product in China, and also the first index type and cash-settled futures contract in a service sector in China. Using the yuan for valuation and settlement is another important feature of the EC futures contracts. As a contract open to global traders, using the Chinese yuan as the settlement currency serves to facilitate traders and promote the yuan internationalization, according to INE. The new freight index futures will provide shipbuilding companies, cargo owners and container firms a financial tool to avoid price fluctuation risks.
Companies that plan to use container ships to transport goods from Shanghai to Europe can buy the futures in advance to cover possible losses caused by rising freight rates. In recent years, freight rates changed rapidly. The global container shipping industry suffered from price fluctuations, and for a very long time, companies lacked a tool for risk management, said Zheng Ping, Chief Analyst at news portal chineseport.cn. The EC futures contracts can help traders build price expectations and subsidize expenditures caused by changing freight prices, Zhang said. As the world's largest exporter of goods, China has a huge container freight market. As of 2022, seven of the world's top 10 container ports are in China, with the Shanghai port being the largest, according to Clarksons, a shipping services provider. In the first half of 2023, China's goods exports reached CNY11.46 trillion, up 3.7% year-on-year. Following the current growth momentum, Chinese exporters hope to improve their foreign business and promote exports. The EC futures could serve as a useful risk management tool, the Global Times reports.
The China Daily adds that the Shanghai (Export) Containerized Freight Index based on settled rates, or the SCFIS, which is updated by the Shanghai Shipping Exchange every Monday, is the underlying asset of the newly launched futures contract. The SCFIS tracks the average level of spot-market, post-departure settled rates for containerships traveling from Shanghai to Europe. In all, 369,000 lots of the main contract were traded on August 18, with their value reaching CNY16.56 billion. After opening at 770 points, the main contract closed at 916.3 points. Fang Xinghai, Vice Chairman of the China Securities Regulatory Commission (CSRC), said at the launch ceremony that the Containerized Freight Index (Europe Service) futures is one of the most innovative products introduced in the Chinese futures market in the past few years. The new product’s stable launch and operation will help advance the Chinese futures market’s opening-up and promote further product innovation.
According to Clarksons Research, China has overtaken Greece to become the world’s largest ship-owning country in terms of gross tonnage at 249.2 million tons, accounting for a global market share of 15.9%, or about USD180 billion in fleet value.
