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Soon, shippers can hedge against future freight costs.

German ship-owner and broker, Ernst Russ, has taken a significant step forward by opening up the $186-billion container market to derivatives trading for the first time, after developing a product to provide shippers with a hedging mechanism against future freight costs, according to Lloyd’s List. This would be achieved by using the newly-established ConTex index of twice-weekly container charter rate assessments, launched last year by Germany’s shipbrokersR 17; association. First trades could begin by the end of the year. Lloyd’s List has noted that derivatives trading has boomed in the volatile dry bulk sector, with forward freight agreements forecast to cover 2.4 billion tonnes of freight work $125 million in 2008. The wet derivatives market is estimated to be about one-fifth of the size. Major boxship customers and operators could use container FFAs to take positions to help fix their future costs, it is felt.

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