S&P Dow Jones Indices, the world’s leading index provider, has launched the S&P GSCI Freight Index Series, the first of their kind in the market and an expansion of the single-commodity offering of indices based on one of the most widely recognised benchmarks for investment in the commodity markets.
With the aim of filling a market gap, the S&P GSCI Freight Indices provide publicly available performance benchmarks for the largest shipping sector and most liquid forward freight agreements (FFAs) market, based on the Baltic Exchange’s monthly and quarterly FFA prices for capesize and panamax vessels.
As the main shipping derivative instrument, FFAs track the average daily chartering cost for a standard-sized vessel that performs a voyage via one of the main shipping routes. FFAs are cash-settled futures contracts that are traded over the counter via voice brokers and are subsequently novated to exchanges such as Singapore Exchange (SGX) and the European Energy Exchange (EEX) clearing houses.
Disruptions to global supply chains in recent years have highlighted the importance of the global freight market in the global economy and its contribution to international trade. Dry bulk FFA volumes hit 2,524,271 lots in 2021, up 61% on 2020, according to the Baltic Exchange. The FFA volumes based on both capesize and panamax vessels accounted for approximately 90% of the underlying physical dry bulk market flows.
The S&P GSCI Freight Indices, which also draw on market knowledge on shipping investment technology and analytics company TonnEdge, now provide financial market participants with tools to monitor, measure, and capitalise on opportunities in this dynamic market segment.
“Disruptions to global supply chains over the last few years have put global freight markets in the spotlight, highlighting their important link in the chain of the world economy and contributions to international trade.
“As global investors increasingly seek to diversify their investments and look for alternative vehicles to tap into niche market segments, this index series can be a meaningful gauge for the final value of this commodity,” remarked Fiona Boal, head of commodities and real assets, S&P Dow Jones Indices.