Freight Investor Services (FIS) has concluded its first futures trade on the SGX Platts Marine Fuel 0.5% FOB Singapore Index ahead of the global sulphur cap. The trade was for a March 2020 contract, done at $503 per tonne.
“The volatility and price risks for shipping companies as we approach the start of the IMO2020 regulations are putting intense pressure on the margins that shipowners will earn next year,” said FIS founder John Banaskiewicz. “On a Brazil-China voyage at $21.90/tonne, the 0.5% fuel component represents 56% of the freight rate, an incredible $6.60/tonne premium compared with using 3.5% fuel. On the Aus-China route at $9.80, 2020 compliant fuel would be 43% of the freight rate, a $2.70/tonne premium over 3.5% sulphur fuel.”
“The fuel oil paper market, used for hedging bunker fuel exposure is very liquid but shipowners are still a small part of the liquidity and can often get overlooked because of their trade size requirements,” FIS stated in a release.
FIS can offer contracts in all sizes from 10m tonnes upwards with clearing via CME.