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HSH Nordbank sees box derivatives gaining ground with low-value goods

CONTAINER freight derivatives, as hedging instruments, are enjoying a comeback with low-value goods since Clarkson Securities did its first container freight swap between Morgan Stanley and Delphis in 2010.

High-volume, low-value commodity exporters in Germany and of US agricultural exports show more interest than shippers of expensive goods because of the higher impact of freight rates on cheaper commodities.

"Volumes have quadrupled since last summer," says HSH Nordbank containerised freight solutions vice-president Kai Miller, without revealing volumes.

Derivatives "are gaining acceptance", he told Lloyd's List, with forward freight agreements likely to be in regular use in the container trades within two to three years.

HSH Nordbank has both bought and sold derivatives products on behalf of clients, sometimes through brokers in the interbank market, but also directly.

Most carriers have refused to have anything to do with these instruments, but some carrier-owned forwarders have been receptive, said Mr Miller.

It is easier to hedge freight rates in the Asia-Europe trades because the Shanghai Containerised Freight Index (SCFI) is a benchmark, though it only tracks outbound routes from China and not inbound or non-China trades.

But backhaul is known for lower rates because of the high volume of empties and cheaper commodities as wastepaper.

In volatile markets, shippers seek stable prices in supply chains, and are considering financial instruments as a way to obtain freight rate predictability.

Given carrier hostility, sellers of derivatives have faced difficulties, with three London shipbrokers closed down their container derivatives desks over the past year.