Baltic Exchange announced that both SGX and European Energy Exchange (EEX) are now offering new Baltic Handysize futures contracts, providing market participants with dedicated tools to manage their exposure to the Atlantic and Pacific Handysize basin.
The new freight forward agreements (FFAs) are two baskets of Baltic Exchange's handysize timecharter averages made from four Atlantic routes and three Pacific routes, providing forward contracts specific to the basin. The baskets center on physical contracts for vessels that are highly active on corridors for minor bulks, grains and seeds.
The introduction of these new FFA contracts marks the latest step forward in the continued evolution of the dry bulk freight derivatives market, enhancing transparency, liquidity and hedging capabilities developed following industry consultation and market feedback.
SGX launched the HSATC Atlantic contract on June 22, making it the second handysize FFA after it launched a timecharter FFA for seven Baltic routes (HS7TC) in 2021.
EEX launched both the HSATC Atlantic FFA and HSPTC Pacific FFA on 21 September, marking the first time that the exchange has made handysize contracts available to the market. The two new timecharter average Handysize Freight Futures available from EEX will allow more granular hedging opportunities within the Atlantic and Pacific basins.
With FFA contracts for Handysize vessels operating in the Atlantic and Pacific basis now available on two major international exchanges, traders will be able to more accurately target their hedging directly to these markets, allowing them to isolate their exposure to pricing fluctuations in other trading corridors. The contract will also enable traders to match their hedges more closely to their physical exposure in both basins.
The launch of HSATC and HSPTC with EEX, following similar new contracts available with SGX, is the latest example of the continued growth in the global FFA market as shipping companies and traders look to hedge against regional volatility and improve their financial position. It also reinforces Baltic Exchange's critical industry position in setting benchmark rates for freight contracts, as well as the Baltic's proactive role of responding to market demand for indexes that reflect smaller but critically important freight segments.
