The Shanghai Shipping Exchange has launched a new index in order to better control the risks from the volatility in container freight rates and promote derivative trading.
The Shanghai (Export) Containerized Freight Index based on Settled Rates (SCFIS), which will be updated every Monday, reflects the average settled container shipping rates on the routes from Shanghai to Europe and the US west coast.
The index was launched after container shipping rates spiked to record levels on China – US routes in the past couple of months, forcing Chinese authorities to intervene.
The index marks the birth of the transactional shipping freight index in China
According to the exchange, the data for the index will be directly collected from shipping companies and has been developed to meet the growing demand of hedging the risk of freight rate fluctuations.
The index has been developed on the basis of the existing China (Export) Containerized Freight Index (CCFI) and the Shanghai Containerized Freight Index (SCFI). SCFIS uses the rates used for settlement after the departure of containerships, while SCFI uses the booking rate. As such the SCFI is an index on what shippers expect to pay, and the SCFIS will show what was actually paid.
“The index marks the birth of the transactional shipping freight index in China, giving the freight index the potential to become an important innovative trading tool in the financial market, and laying a solid foundation for China to create shipping freight index futures,” SSE said in a release.
An official at SSE said the exchange is now considering futures contracts based on Shanghai-Europe routes in RMB terms.