What are the Baltic Dry Index (BDI) and Container Freight Index (HRCI, SCFI, CCFI)?
The freight charge usually means ocean freight, but ocean freight is the charge that you send and receive when you load cargo using a ship. Freight rates continue to fluctuate depending on the market environment, and the rate of change is expressed numerically.
With about 35% of the world's maritime traffic concentrated in Asian waters, the marketability of these routes' derivatives is very high.
The derivative trading of the Ocean Freight Index using the Baltic Freight Index is worth 1.4 trillion won as of 2011, and it is marketable considering that it is during the shipping recession. In addition, the BDI index is highly volatile due to the nature of the shipping industry, so it has a commercial value as a derivative.
Background of the introduction of Container Line Price Index
The development of container ship price index was actively carried out in the UK and China. The Shanghai Containerized Freight Index (SCFI) and the China Containerized Freight Index (CCFI) published by Shanghai Shipping Exchange (Shanghai Shipping Exchange) in China are typical.
However, in shipping, the price index was centered on the dry cargo market rather than the container ship market. In the past, the price index of the dry cargo market was developed because of the introduction of the Freight Forward Agreement.
The appearance of futures trading in shipping stems from the characteristics of shipping. Between 1970 and 2006, the world's sea volume nearly tripled and has been on the rise until recently. In this quantitatively expanded shipping market, there was no way to manage the risk of freight rates except selling ships, joint operations, long-term vessels, long-term vessels (or presidential elections), or making long-term contracts (COA, etc.).
In addition, it was difficult to introduce derivatives for risk management in shipping because the underlying asset of shipping was a service that, unlike ordinary products, has no physical substance and cannot be stored. As a result, there was an internal problem that was difficult to derivative. Under these circumstances, trading began in 1982 when S&P500 futures were listed on the Chicago Mercantile Exchange, starting with products targeted by the Value-Line index on the Kansas Mercantile Exchange. With the introduction of such stock index futures trading, futures trading became possible in shipping. The first ocean freight forward transaction was BIFFEX, which was introduced on May 1, 1985. This was traded on the London Community Exchange, now part of the Euronet. LIFFE, where the underlying asset (underlying asset) was the BFI (Baltic Freight Index).
The development of such transactions and indices around the dry cargo market is attributed to the relatively strong nature of the market. The dry cargo ship market seems to have a greater risk factor than the container ship market, where freight contracts are carried out through General Cargo Rate (GCR). However, in recent years, such futures trading has been introduced in the container ship market, and index development has been active. This is because the container ship market also needs to hedge freight risk, and furthermore, as financial techniques develop, the container ship freight index is becoming derivative.
China's offshore freight index futures trading is based on the SCFI Container Freight Index and CBFI Index. China launched the SCFI-based Container Freight Swap Trading (CFSA) in January 2010, the CFSA Payment Service through the London Settlement Office in June 2010, and the Singapore Exchange Clearance Service in August. In June 2011, Shanghai Port Transportation Trading Center launched its own liquidation service, and in December 2011, dry cargo offshore coal transportation route futures trading began. The supervisors are Shanghai City, China Transportation Ministry, and the payment bank consists of the Bank of China (BOA), China Commercial Bank, and Heungup Bank.
Type of Index of container ships
The index of container ships can be divided into freight rates, utility charges, and other indices.
First, freight rates are represented by the Shanghai Containerized Freight Index (SCFI) and the China Containerized Freight Index (CCFI) published by the Shanghai Port Trade Center. There's the recently published World Container Index (WCI) and Drewry Freight rate Benchmark.
Second, the utility fee index varies widely. While the freight index is used as a basic asset for futures trading, the utility fee index is mainly used to determine the level of the market. The index is published by the Howe Robinson Containerization Index (HRCI), the Hamburg Shipbroker's Association, and the British shipping broker Bremer Seascope.
Other indices include the TSA's revue index, an import index published by the Transpacific Stabilization Agreement.
Bulk Freight Index
# BDI: Baltic Dry Index
It is a representative index of the global shipping industry's economic conditions, and is a comprehensive transportation index announced by the Baltic Shipping Exchange in London since November 1999. Bulk shipping is mainly used, so it's called 'Bulk Freight Index'. Freight rates are assessed mainly for raw materials such as coal, grain, building materials, ore, etc. based on the freight level of January 4, 1985. Also known as the Baltic Dry Index (BDI).
Members of the Baltic Shipping Exchange contact the ocean freight broker directly to evaluate the shipping route, shipping product, and delivery time given.
It consists of three sub-indices that measure dry bulk carriers of different sizes.
- Capesize carrying approximately 150,000 tons of iron ore or coal cargo
- Approximately 60,000 to 70,000 tonnes of panamax carrying coal or grain cargo;
- Supramax with carrying capacity of 48,000 to 60,000 tonnes.
The Baltic Sea Dry Index is calculated by reflecting 23 different sea routes that transport coal, iron ore, grain, and many other goods.
The Baltic Freight Index soared from 2005 to May 2008, once rising to more than 11,450, but after the global financial crisis, the index has fallen sharply to form below 2000.
Container Freight Index
# Howe Robinson Container Freight Index (HRCI) : Container Line Vessel Index
British shipping broker Howe Robinson C.I. announces weekly as a container ship index. As of January 15, 1997, 1000 points (HR 1000) were set. We've indexed 12 linear container rates, which are mostly traded in the global shipping market.
# Shanghai Containerized Freight Index (SCFI) : Container Freight Index from Shanghai
Presentation by Shanghai Shipping Exchange (SSE). As of October 16, 2009, we set 1000 points. The freight information for 15 major routes from Shanghai has been indexed. Typical preferences include Maersk Line, CMA CGM, Cosco Container Lines, Hanjin Shipping, NYK, and OOCL. Originally published on December 7, 2005, the new SCFI was published in October 2009 (based on = 1,000).
Freight is based on 20-foot and 40-foot containers and produces a weekly composite freight index. This index includes ocean freight and side freight, and it is based on export freight. Therefore, the main routes from Shanghai are Europe, the Mediterranean, the West Bank, the United States, the United States, the Persian Gulf, Australia, New Zealand, West Africa, South Africa, South America, West Japan, Southeast Asia, South Korea, Taiwan, and Hong Kong.