Tanker Forward Freight Agreement (FFA) volumes spiked this October in the wake of physical market volatility. 27,200 lots were reported traded in the clean and dirty tanker markets for the week 7-11 October, dropping to 15,847 lots the following week.
Volatility in the tanker market is at a record high and, for the first-time, tanker FFA volumes have exceeded dry FFA volumes.
An underlying reason is the greater perceived risk in the market due to global uncertainty, such as trade sanctions. When the market is looking to hedge its risk, the physical market is restrained by the number of available vessels and counterparty exposure. FFAs offer an alternative risk management solution.
The Baltic has invested in growing the tanker FFA market, which has increased the profile of FFAs and their use in risk management. With improved exposure and trust in tanker FFAs, this is now an option that many in the market feel confident in incorporating into their strategy.