World Container Index, a 50-50 joint venture between Drewry and Cleartrade Exchange, has announced that over-the-counter freight swap trades will now be cleared on two new backhaul routes by LCH.Clearnet.
WCI assessments on the Los Angeles-Shanghai and Rotterdam-Shanghai trade lanes will be available with contracts similar to those offered by LCH.Clearnet for Shanghai-Los Angeles and Shanghai-Rotterdam in the headhaul directions.
WCI commented that the largest backhaul commodity groups include wastepaper and scrap metal and plastic, as well as agricultural commodities and chemicals, carried under a larger percentage of spot business than is typical on the headhaul trade lanes.
While freight rates on these routes are less volatile, market movements can be much larger in relative terms due to the low value of the freight, and doubling of rates is not uncommon. Rates are driven by the availability of containers rather than vessel space, which makes rates less predictable and therefore highly suitable for hedging, the indexing company suggests.
Indexed freight swaps now hedge backhauls
