Freight Investor Services (FIS) is behind the launch of the Baltic Exchange Panamax P8 grains route.
The new route offers shipowners and grains market players on the Brazil-China soyabeans route a complementary method of hedging to the existing Panamax P2A route. P8 is a panamax vessel freight route from Santos, Brazil to Qingdao, China, primarily used to carry soybeans for processing in China.
At current pricing of $32.042/tonne FIS estimates that each P8 trip carries approximately $2m of unhedged freight risk with around 38% of this associated to the cost of fuel oil.
The modern FFA market traces its roots to 1985 and the BIFFEX Index, of which US Gulf-Japan Route 2 grain routes formed an important part, hedging approximately 15m tonnes of physical corn business annually.
“Grain routes are where it all began for many of us in the FFA market and it’s great to be at the forefront of a new phase of liquidity in dry FFAs and see a new trading opportunity come to fruition,” said FIS founder John Banaskiewicz. “This is a cause we have fought for over many months, encouraging the Baltic to list the new route and working with customers to raise awareness of the opportunity.”
The market for seaborne transport of soyabeans is approximately 150m tonnes per annum, with 95m tonnes of this thought to have been exported to China in 2018, 80% of which originate from Brazil. FIS has been providing forward curves during the new route’s trial period and will continue to contribute curve and settlement price data.