On 18th August 2023, the Shanghai International Energy Exchange (INE) made a significant announcement regarding the launch of the new Containerized Freight Index Futures Contracts.
The INE Containerized Freight Index Futures Contracts are accessible for trading to both domestic Chinese traders and international traders, marking a significant development in the exchange’s offerings.
This article seeks to provide an in-depth understanding of the four key aspects to be aware of when it comes to the newly introduced China Containerized Freight Index Futures from INE.
1. Launch of Internationalized Futures Products from China
In 2018, China embarked on a strategy to expand the availability of its futures contracts to international participants. This aims to enhance its influence in the commodities markets where it holds significant dominance.
The first move was the introduction of a yuan denominated INE crude oil futures contract in March 2018 on the Shanghai International Energy Exchange (INE Shanghai). This Chinese crude oil futures contract has become the world’s third-largest crude oil futures contract, following Brent oil futures and West Texas Intermediate.
This development has kickstarted the launch of internationalized futures products from China, allowing foreign traders to trade with China. This includes iron ore futures 及 Soybean futures contracts and more.
With the combined efforts of Internationalized Products from China and the QFI China scheme, foreign traders now have ample opportunities to trade into China.
2. China’s New Internationalized Product: INE Containerized Freight Index Futures
To support China’s efforts in developing a strong shipping industry and to further enhance Shanghai’s role as an international financial and shipping centre, INE introduced the Containerized Freight Index Futures for international traders.
This futures contract will be based on the Shanghai Containerized Freight Index, specifically the Settled Rates (Europe Service) (SCFIS (Europe service)), compiled by the Shanghai Shipping Exchange (SSE).
The SCFIS is a containerized freight index that monitors fluctuations in settled freight rates within the Shanghai export container shipping market. Specifically, it represents the average level of post-departure settled rates for container ships voyaging from Shanghai to Europe in the spot market.
The listing of this futures aims to enhance Chinese shipping finance services, further strengthen the role of futures markets in supporting the real economy and contribute to the growth of the shipping industry.
This initiative reflects China’s commitment to fostering a thriving shipping and financial ecosystem, ultimately facilitating its position as a significant player in the global maritime trade landscape.
3. Trading INE Containerized Freight Index Futures
International traders can only trade INE Containerized Freight Index Futures through an overseas intermediary such as 东证期货新加坡.
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Orient Futures Singapore have direct access to trading, clearing, and settlement to Futures and Options products from China.
INE 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
4. INE Shanghai Containerized Freight Index Market News
The information presented below are from the Orient Futures Research INE Containerized Freight Index Report dated 17082023.
INE Shanghai Containerized Freight Index Price
According to the report, the INE SCFIS Futures debuted on August 18 with a benchmark price set at 780 points.
European Route Shipping Spot Market Outlook
The increase in shipping capacity currently stands as the primary bearish factor in the European Route shipping market. A visible path for improvement in European Route container demand is absent, and long-term demand remains pessimistic.
The oversupply of European Route containers is expected to further deepen. However, the shipping market possesses a unique structure, and while the trend of future freight rates might not be overly pessimistic, it is also inadvisable to be excessively optimistic.
European Route freight rates will be influenced by the intensity and duration of supply-side adjustments in a fluctuating manner. Given the ongoing deterioration of the oversupply situation, significant pressure on freight rates from above is anticipated. Thus, substantial support can be expected from variable costs below.
It is projected that until April of next year, SCFIS (European Route) will maintain a wide-ranging fluctuation between cash costs and total costs.
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