Shippers Voice weighs derivatives? merits

Shippers Voice weighs derivativesÆ merits    U.K.-based shippers' advocacy organization Shippers’ Voice has published a white paper examining the topic of container freight derivatives and whether they will benefit the industry.
   The paper, Container Freight Derivatives ' Helping Shippers Manage Risk (available at www.shippersvoice.com), was written in conjunction with Freight Investor Services Ltd. and is designed to stimulate debate among shippers, forwarders and carriers.
   'One of the greatest problems for shippers is determining an accurate budget forecast for the cost of ocean freight transport,' said Andrew Traill, managing partner of Shippers' Voice. '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.'

Traill

   Traill said he does not dispute that shipping lines need to operate at a profit and that they too are subject to significant cost volatility, especially related to fuel.
   'But 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,' Traill said. 'Many people do not realize that the derivatives contracts exist completely separately from standard service contracts for the shipment of containers. Derivatives contracts are a 'paper' market only. They are not a contract for physical delivery of vessel space or cargo.'
   Traill added, 'There is a strong argument to suggest that hedging your rates can allow you to build contracts with more emphasis on service than rates. It is quite a complicated subject for people not used to working with these financial instruments, so we are helping explain the concept so that all those potentially involved can understand exactly how it works.'