- New Baltic Code now live
We’d like to remind members that the new Baltic Code went live on 6 April. Members are advised to familiarise themselves with the new version should they have not already done so.
The new Baltic Code
The new Code looks to better reflect the compliance and operational challenges created by constantly evolving legal, regulatory and policy in all jurisdictions where Baltic Exchange members operate or do business.
Written with input from both the Baltic Membership Council and Baltic Exchange Council and reviewed by the wider membership, ‘Our Word Our Bond’ remains at the core of the new Code.
The objectives of the new Baltic Code are to:
1. Preserve confidence in and the integrity of physical freight and freight derivative markets.
2. Establish and execute ethical business practices and eliminate poor practices in these markets.
3. Ensure the role of the Baltic Exchange remains at the centre of these markets.
Underpinning the new Baltic Code is set of universally accepted set of principles and good practices that will be applicable not only to members but also to any physical freight and freight derivatives market participants.
It is therefore built around five key principles:
1. Integrity of Markets
2. Fairness and Competition
3. Ethical Business
4. Good Market Conduct
5. Robust and Credible Benchmarks
The new Baltic Code is now available on the Baltic website and can be viewed here.
- Baltic Exchange partners with TAC Index and moves into air cargo market
EU authorised benchmark administrator the Baltic Exchange has partnered with air cargo pricing publisher TAC Index Company of Hong Kong. The Baltic Exchange and TAC will provide new regional general air cargo rate assessments. TAC’s Regional General Air Cargo Indices will be rebranded as the Baltic Air Freight Index (BAF Index) powered by TAC Index and come under the governance of Baltic Exchange Information Services Limited (BEISL). TAC Index will act as the Calculating Agent.
TAC Index provides weekly average assessments for general cargo on 32 major air trade lanes and is based on transaction data submitted by global freight forwarders. Launched in 2016, the TAC Index is widely referenced in the air cargo market and has established itself as a trusted and independent source for market freight rates.
The Baltic Exchange will initially undertake a rigorous review of the TAC Index’s methodology and processes to establish a governance structure which will ensure the index’s compliance with UK’s Financial Conduct Authority’s (FCA) rules for benchmarks.
The Baltic Exchange already provides benchmark assessments for the maritime markets which are used to settle billions of dollars-worth of derivatives and physical trades every year. Baltic Exchange Information Services is itself authorised by the UK’s FCA as a benchmark administrator under EU Benchmark Regulation. This means that the Baltic Exchange’s main daily maritime indices are regulated by an EU National Competent Authority.
Baltic Exchange Chief Executive Mark Jackson said:
“Our status as a regulated benchmark administrator opens up all sorts of possibilities for the air freight market. We are confident that the index will provide a completely independent and uncompromised view of the air freight market and the audited Index will become listed by financial clearing houses. This would provide the industry with new ways of managing its freight rate risk and potentially bring in new market participants.”
TAC Index Managing Director John Peyton Burnett said:
“We are very excited to be partnering with the Baltic Exchange. TAC Index has seen its air freight indices become the primary price benchmarks for carriers, lessors, shippers, forwarders and end-buyers globally. The partnership with the Baltic Exchange will drive further integration of air freight into the global commodity markets and put the indices at the heart of a substantial new global forward freight market.”
The global air freight market is estimated to be worth US$100bn, with 65 million tonnes of general cargo moved by air annually. It is estimated that less than one percent of world trade by tonnage is carried by air, but because of the high value of these goods, they represent about 35 percent of the value of goods shipped globally.
Baltic Exchange member Freight Investor Services (FIS) launched the Air Freight Forward Agreement (AFFA) market in 2019, using TAC as the basis of settlement. FIS worked with TAC to develop a robust methodology for air freight.
“Freight Investor Services has been instrumental in pioneering the development of the airfreight derivatives market from the ground up and the highly volatile market movements of the last few weeks demonstrate the need for better risk management tools,” said Peter Stallion, Airfreight Derivatives Broker at FIS. “Our work with TAC Index has helped to lay solid foundations and this agreement with the Baltic Exchange will help to drive forward liquidity in the airfreight derivatives market.”
The Baltic Exchange is the provider of daily assessments for the dry bulk, tanker, gas and container markets. Shipping companies, traders, charterers and shipbrokers use Baltic Exchange to settle Forward Freight Agreements (FFAs) and index-linked trades. The Baltic Dry Index is the Exchange’s best-known index and is a barometer of the cost of moving commodities such as grain, coal and iron ore by sea. The Baltic Exchange is a subsidiary of the Singapore Exchange (SGX).
- Free access to the Baltic Exchange App to all members
Given the current disruption we have decided to provide free access to the Baltic App to employees of every member company, regardless of whether the individual employee is a member or not. During this difficult time, we want to ensure members are still able to access market information while so many of us are working away from our offices.
For those unfamiliar with it, the Baltic App is designed for both Android and iOS operating systems. The app provides instant access to a wide range of Baltic information including rates, fixtures, member contacts, news and much more.
Key features include:
- Live market data, including all historical Baltic indices & assessments and charts
- Live and historical FFA data, including forward assessments and volumes
- Push notifications for all Baltic spot data upon publication
- Member search facility. All company and individual contact details easily accessible
- Market intelligence including daily & historical fixtures, market reports, circulars and news
- Listings of all Baltic Exchange meetings, social and educational activities
Users can customise data notifications to receive the information they need as it’s published.
To take advantage of this opportunity, sign up here.
- Member Update: 22 April
The following individuals have applied for membership of an existing Member Company:
Individual Company Mr P Anagnostakis Acropolis Chartering & Shipping Inc
Miss Y Feng Clarksons Platou
Mr F Marrodan Marin Enel Global Trading SpA Mr D Chen Freight Investor Services Ltd Captain H Huiren Greathorse International Ship Management Co Ltd Ms A Liu Mr H Xue Mr R Meade Lloyd’s List Captain A Christopoulos Thenamaris (Ships Management) Inc
The following individual has applied for Retired Membership:
Captain P B Giles
Any comments should be passed to Karen Karanicholas by 29 April 2020.
- Funeral details for Zdenko Blazic
For those wishing to access and attend Zdenko Blazic’s cremation digitally, please follow the instructions shown below exactly as they are printed. A trial run can be operated beforehand which will take you to the site showing
a pond with a duck and a small waterfall. If this is clear you are in. It is advised to contact the website 5/10 minutes before the service starts at 12.30 on the 24th April.
Service order for
24-Apr-20 at 12:30
Chapel – Colchester
Please send this username and password to family and friends. You can login to our website at any time to view a test connection (and we strongly recommend you do this) but you’ll only be able to view the Live Webcast between approx. 12:30 and 13:05 on Friday 24 April.
Please check you’re only copying the exact username and password with no extra spaces.
East Of England Colchester
Request Booked By
- Pinning hopes on LNG wild cards
Liquefied natural gas brokers banking on a fixture boom between the US and China on the back of the trade agreement signed in January have been somewhat short-changed. No US LNG had been delivered to China since March 2019 because of 25% tariffs imposed by China on American cargoes in retaliation for US duties on Chinese goods. But a deal struck between the two countries at the start of the year made LNG shipments to China more economical as import tariffs exemptions were put in place.
This hasn’t, however, translated into the LNG shipments that were expected by the market. While it was celebrated, the arrival of the first shipment of US LNG to be delivered to China in more than a year at Tianjin yesterday proved to be the start of a trickle rather than a flood of China-bound US LNG cargoes. Just three more US LNG deliveries are expected in China in April, followed by a lowly two in May.
Covid-19 can be partly blamed for the slow take-up, but not entirely. Low Northeast Asian spot LNG prices can share responsibility, as can China’s waning appetite for US LNG. And with fears of a second wave of infection hanging over Asia, cargo cancellations and deferments seem inevitable.
Poten & Partners, a panellist reporting on the Baltic Exchange’s gas indices, sees trouble ahead for the LNG sector on a global level. Speaking in a webinar, Jefferson Clarke, head of the firm’s LNG commercial analytics team, said he is concerned about the percentage of the fleet uncommitted on term charter. A robust orderbook has an uncomfortable amount of uncommitted vessels, which will be delivered into a market just as a significant proportion of the existing fleet comes off charter. “It’s going to be difficult for ship owners to find sustained employment for greater than five years,” said Clarke in his analysis of the sector. Forecasting one year out, he added that 15% of the fleet is going to remain uncommitted unless there is a decent uptick in chartering.
In terms of LNG cargoes, the global market peaked in December 2019 into January 2020 at around 500 cargoes per month. Since then, LNG cargoes have dropped by around 70 to 50 cargoes to reach 438 for March and a forecast of 424 for April. “We forecast a gradual increase to return to those levels by December,” said Clarke.
At best we are remaining flat year-on-year, but we are more likely looking at a forecast drop in total LNG export trade by 1% for 2020.”
This is, he stressed, a “global phenomenon” with the pain being shared across all the major exporters and impacting the shipping markets. “The market was tight back in December 2019 and there were barely enough vessels to deliver those volumes. Since then we have seen a drop in cargo export volumes while the LNG fleet has remained steady,” he said, adding that the 37 deliveries expected by the end of this year will compound oversupply issues. By the end of the year the LNG fleet will have grown 7% to 540 vessels, according to Poten’s data.
But there are big wild cards to consider. First, LNG carriers can be used as storage. Second, Covid-19 logistical disruption is causing port delays which in turn reduces vessel availability. Third, there are approximately 210 to 220 steam turbine vessels on the water today with another 21 laid up and five undergoing conversion. “The question is whether more of those lay-ups will happen in the future,” asked Clarke. All of these wildcards can act as a buffer when headline rates fall to $30,000 per day, he added.
Poten also noted the changing destination for US cargoes: in 2019 a large proportion of US LNG cargoes were headed for the Asian and Latin America markets. But as demand dropped, Europe took up the slack and welcomed US LNG cargoes. “The question is whether this trend will change,” said Clarke. While he noted that there has been a slight trend of more cargoes into Asia of late as parts of the region start to open up, there is a big question mark over whether that trend will continue.
Analyst Wood Mackenzie expects global LNG demand to grow by 6% year-on-year to 371 million tonnes in 2020, with Asia playing a key role. China’s LNG demand is expected to reach 65 million tonnes this year, equivalent to 6.6% growth year-on-year. Japan and South Korea, meanwhile, will increase 5.1% and 7.7% over 2019, respectively, with LNG displacing coal in the power sector of both countries. “This growth could be faster still if a recovery takes hold earlier,” said the consultant. However, it conceded that today, the path to recovery “feels an uncharted voyage”, summing up sentiment in the current LNG sector.