HSH Nordbank AG, the world’s largest shipping bank, will begin offering swaps on container freight costs as shipping lines, logistics companies and importers seek to hedge price swings.
The forward freight agreements will allow rates to be fixed up to two years in advance, the Hamburg-based lender said in a statement today. Contracts will be settled against the Shanghai Containerized Freight Index, a global benchmark, according to the statement.
About 90 percent of world trade travels by sea, according to the Round Table of International Shipping Associations. The International Monetary Fund expects trade to advance 4.5 percent this year, from 3.2 percent in 2012. Traders and investors already use swaps to hedge prices and bet on future rates for ships carrying crude oil, refined fuels and dry-bulk commodities such as iron ore and coal.
“Using FFAs makes it possible to limit the freight-rate risk,” Dirk Reiche, head of products at HSH Nordbank, said in the statement. “Both importers and liner shipping companies benefit from the advantages of this hedging instrument in equal measure.”
The index, published weekly, tumbled 18 percent since the start of May to 1,232.35, according to the Shanghai Shipping Exchange. It’s still up 26 percent from a year ago, data show.
Freight rates are volatile, swinging by more than 9 percent in eight of the last 12 months, according to data from Clarkson Plc, the world’s largest shipbroker. The cost of shipping a 40-foot boxload of manufactured goods to the U.S. West Coast from China rose 28 percent in the past year to $2,341, according to London-based Clarkson, which already offers container swaps.