On 18 August 2023, the Shanghai International Energy Exchange (INE China) has announced the launch of the new Containerized Freight Index Futures Contracts (Europe Service).
The launch of this futures contracts was meant to launch as early as September 2022.
However, after months of preparation and strategic cooperation, the long-awaited product is only launched on August 2023 upon approval from the China Securities Regulatory Commission.
Part of the delay in the freight index was caused by the Covid 19 pandemic, which has greatly affected the shipping industry and resulted in a severe shortage of containers as global trade remains imbalanced. Coupled with the volatile economic environment and unstable macroeconomic events, the shipping sector has been at great risk. A few of the other exchanges that offer these freight futures clearing are the Singapore Exchange, Intercontinental Exchange, CME, and the European Exchange.
In preparation for the launch of the freight index, this article will cover key characteristics of INE product and current trends.
INE Shanghai Containerized Freight Index Futures
The SCFIS is an index for sea freight rates for imports from China worldwide. It is an indicator of freight prices for container transport from Chinese ports. These ocean freight futures usually settle over the average of the spot price during the corresponding month.
The trade routes for the freight from Shanghai include Europe, the Mediterranean, the United States, the Persian Gulf, New Zealand, West and South Africa, Japan, Southeast Asia, and South Korea.
In the early half of 2023, most sources report that the rebound of cargo volume that is usually expected before the New Year would be insufficient to support an imminent transpacific price increase by carriers.
With the mechanism of the futures in place, the industry will allow more hedging and risk management by traders, and this is expected to open new models of trade. Additionally, amidst the volatile state of the current market, it will enable tighter price control and freight fluctuations.
INE Shanghai Containerized Freight Index Futures Contract Specification
The INE Containerized Freight Index Futures Contract has the following specifications:
The Futures Contract has a minimum price fluctuation of 0.1 index points.
Contract months are February, April, June, August, October, and December
The last trading day of the contract month is the last futures-trading Monday of the delivery month.
Shanghai International Energy Exchange trading hours are 9:00–11:30 am, 1:30–3:00 pm, and other trading hours prescribed by INE.
The settlement type of this futures contract is cash settlement.
INE Containerized Freight Index Futures symbol: EC
Market News
In 2021, it was recorded by Japan International Freight Forwarders Association Inc that the composite China Containerized Freight Index (CCFI) rose 3.9% from the previous week to 2,216.63 points, reaching the highest level since it was first calculated.
For the monthly Shanghai container freight index, Statistica has similarly indicated that in January 2019, the index amounted to 945 points, and in November, the index reached a value of over 1,200 points.
In 2023, Hellenic shipping news reports that the lead-up to CNY in 2023 has been the worst in 13 years. This year, both spot and averages have fallen, in fact, the index has seen a 50% drop since February 2022 and stood at 1,730 seven weeks ago. On the last week of December, it was at 1,271.
Globally, it is gathered by Seatrade maritime that the level of drop-off in contract rates will vary by line, trade focus, and the amount of spot versus contract business they have, but the prices of freight are not likely to fall anywhere beyond the lowest levels set from pre-pandemic ultra-thin margins.
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Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
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