Last week’s Dry Freight and Commodities Forum in Geneva saw 140 leading traders, owners and brokers discuss developments in the freight derivatives market, including a proposed change to the Baltic’s supramax vessel assessments. 

Against a backdrop of high volumes of FFA trading – so far this year over 2.2m dry lots have been traded, already up 42% on the whole of 2020 – the meeting was an opportunity for participants to have an open discussion with the Baltic Exchange’s Advisory Council (Europe). Panel members included Hans Christian Olesen (Chair of the Advisory Council & Ultrabulk); Sean Deschamps (Olam) and Guy Campbell (Swire Bulk).

Top of the agenda was the panamax market and discussion of the transition from the 4TC to 5TC contract. With a fixed differential in place between the two assessments and high levels of FFA trading in 2021, many FFA traders are continuing to use the old 4TC rate in their contracts. Delegates agreed that another round of broker led matching sessions should be set up to allow traders to move contracts.

Baltic Exchange Chief Executive Mark Jackson told the forum that a move from the current Baltic 58K supramax vessel type to a larger ultramax was planned. The majority of the delegates at the Forum signalled their preference for a 63K dwt vessel, rather than a 61K or 66K vessel type. Explaining the process, Mark Jackson said that the transition could be undertaken within 24 months, with further input from the market needed and at least 12 months required to run the existing and new indices side by side to accurately calculate the differential. Input on the issue will also be taken from the Asian market at a future session. 

The Forum also provided insight into the Baltic’s recent publication of CO2 emissions data for its dry bulk routes and how they are providing a reference point. 

There was also a detailed overview by Baltic Freight Market Assessor Stephen Aitchson on the Exchange’s benchmark production process. He highlighted the fact that the Baltic’s freight market team uses its own internal assessments of the market as well as those submitted by principals as a control number. This control number helps both the Baltic assessors and external auditors ensure that the Baltic’s data as provided by independent panellist brokers is not manipulated. Any owner or charterer member of the Baltic can provide their own, anonymised, assessments to the Baltic to both help the accuracy of the indices as well as see how ahead or behind the market their own internal chartering teams are. 

The Forum was followed by a dinner and offered the market the first major opportunity to meet face to face since 2019.

You can view images from the event here.