UK shipper lobby calls container freight derivative debate

THE UK Shippers' Voice is calling on shippers, freight forwarders, carriers to enter into debate on whether container freight derivatives are the solution to "freight rate volatility."


To facilitate such discussion, the company has posted a paper on its web site, entitled: Container Freight Derivatives - Helping Shippers Manage Risk.


"One of the greatest problems for shippers is determining an accurate budget forecast for the cost of ocean freight transport," said Shipper's Voice managing partner Andrew Traill.


"Promised rates are valid for only a month or two, a plethora of surcharges are added seemingly at will, and, even if rates are adhered to, shipping lines will simply leave that cargo on the dock and select the highest paying cargo to carry," he said.


Dr Traill agrees that shipping lines need to operate at a profit and that they too are subject to cost volatility, especially in fuel.


"That is simply all the more reason why using a system such as container freight derivatives should be seriously discussed - for the sake of both shippers and shipping lines."


He said the paper, written in conjunction with Freight Investor Services, is designed to explain the concept and weigh the pros and cons of container freight derivative contracts, particularly, when and where they work, or not, as the case may be.


"Many people do not realise that the derivatives contracts exist completely separately from standard service contracts for the shipment of containers," said Dr Traill. "Derivatives contracts are a 'paper' market only. They are not a contract for physical delivery of vessel space or cargo."
(Source:http://www.schednet.com)