It’s fine to have an opinion but better to base the opinion on facts, especially if millions of dollars are at stake.
That’s where Kai Miller sees the benefit from a partnership between ICAP Shipping and The Journal of Commerce to share derivative and physical trade data, including ICAP’s Forward Curve on swap agreements settled against the Shanghai Containerized Freight Index.
Miller is business director for container derivatives at ICAP Shipping, a unit of ICAP PLC, the London-based provider of vessel chartering, sale and purchase, freight derivatives and research services.
The ICAP-JOC agreement tracks prices of containerized freight agreements, which allow users to lock in future cash flows of containerized cargo, and will be published in The Journal of Commerce magazine and on its Web site.
Meanwhile, PIERS data on U.S. containerized imports and exports will be available to ICAP’s clients to help inform their decisions. ICAP Shipping and the JOC will publish a joint market report including government trade data that PIERS collects at all major U.S. ports.
“The big benefit is that we can now connect the paper market to the physical trade information,” Miller said. “Everyone who is active in the paper markets can base their trading decisions on real market decisions.”
“Swaps and index-linked contracts are playing an increasing role in global trade,” said Peter Tirschwell, senior vice president for strategy at UBM Global Trade, the JOC’s parent company. “As the leading information provider for all involved in the container shipping industry, the JOC is proud to provide our unique data and analysis to the rapidly growing community to traders in that market segment.”
PIERS data “is a tool to help you come to a trade decision,” Miller said. “This is a pure supply-and-demand-driven industry, and if you know what is entering the U.S., then you have a good data source on which to base your opinion.”
For example: PIERS statistics showed that U.S. import volume rose 2.4 percent in December, but eastbound trans-Pacific volume was flat in the fourth quarter. That data, and statistics on country and commodity, can help guide a carrier, cargo owner or non-vessel-operating common carrier in its projections of market trends.
PIERS data “is a unique data source and something tangible,” Miller said. “If you see how many containers were imported in February, you can assume they will rise further and do a contract for April at that price.”
After initial resistance, container swap agreements are beginning to gain wider acceptance. “It’s only 18 months old, so it is a toddler, but it is a very active toddler,” Miller said. “In these difficult times, people have to think about risk management.”
He said ICAP clients registered for futures swaps include carriers that transport nearly 5 million 20-foot-equivalent container units a year. Only a small percentage of that volume is hedged in swaps contracts, but the volume is growing. Miller said most swaps contracts are 100 to 150 boxes but some range up to 10,000 TEUs spread over a year.
Expanded access to physical data helps participants in paper swaps markets to price their agreements more intelligently, Miller said. “The more information you have to base your trade on, the better,” he said.