Shipping tipped to increase FFA exposure

The forward freight agreement (FFA) market is now worth $100bn, but the shipping community as a whole still has much to learn from the sector, delegates attending this week’s Geneva Dry were told.

Since 2020 onwards there has been a sharp increase in FFAs, bringing a big increase in liquidity according to Greg McAndrew, a partner covering derivatives for SSY.

The increase in volumes from specialists, hedge funds, and commodities giants has been great for liquidity said Claudia Gerotto, Head of Sales – Global Commodities, European Energy Exchange who maintained the whole system benefits from this new customer group.

“Over the past five years volumes have increased significantly and right now the liquidity is amazing,” said Ardalan Sappino, an FFA trader at Swissmarine.

Philippe van den Abeele, the CIO at Consortium Maritime Trading, argued that FFAs give investors the chance to invest in a virtual ship by looking at the forward price curve.

“Virtual shipping is a new way to navigate the market,” van den Abeele told delegates attending this week’s Swiss dry bulk summit.

The FFA session also discussed screen trading, something that has been led by broker Braemar, but also something that was deemed to be a bit too advanced for shipping.

Braemar Screen has had “quite a big impact” according to Chase Bennett, the CEO of Zuma Labs, while Swissmarine’s Sappino said that while this technology is “great”, the shipping market as a whole is not ready for screen trading.

Van den Abeele suggested a new FFA screen should be created owned by all the FFA brokers.

“The only way to have a more vibrant market is to have a more hybrid system,” van den Abeele said.

SSY’s McAndrew cautioned that it would be hard to get all the broker community together.