- FFABA Tanker Freight Derivatives Forum: 25 February
Coinciding with IP Week, the Tanker Freight Derivatives Forum is the world’s largest FFA gathering for the tanker market.
Hosted annually by the Baltic Exchange and FFA Brokers Association, the Forum features freight market insight and discussions.
Agenda Time Activity 13.30 Registration coffee 14.00 Opening remarks – Angus Procter, FFABA Wet Chair (Braemar ACM-GFI) 14.05 Market services update – Mark Jackson, CEO, Baltic Exchange 14.25 Oil and bunker markets outlook – Mike Davis, Director, Head of Market Development – ICE Futures Europe 15.00 Coffee break 15.20 Tanker market outlook & Sulphur Cap 2020 – Henry Curra, Head of Research, Braemar ACM 15.55
Panel discussion: Sulphur Cap 2020, volumes vs cargo flows, new contracts & benchmark updates with:
Adrian Wooldridge, CCO, Navios Maritime
Angus Procter, Wet FFABA Chairman (Braemar ACM-GFI)
Chris Hudson, Senior Broker, FIS Fuel Oil
Simon Newman, Marine Strategy & Freight Trading, Phillips 66
James Pendered, Senior Freight Reporter, Baltic Exchange
Peter Jackson, Crude Freight Derivatives Trader, Shell
17.00 Drinks hosted by the FFABA at Punchbowl
The event is free to attend for freight and derivative traders and those interested in trading exposure to tanker rates.
- Interview: new Wet FFABA Chairman Angus Procter
Welcome Angus. To start, what do you hope to bring as chairman of the Wet FFABA?
With 2020 fast approaching and big structural changes made to parts of the market around the corner, I, along with the Baltic Exchange, hope to be able to help keep broker, trader and new entrants informed about any impending changes that will affect the trading market.
We saw a strong uplift in dirty FFA volumes, particularly during Q4 2018. What caused this growth and what are your expectations for 2019?
2018 was special in that we saw a lot of open interest two years out. Most years, getting Cal+1 to trade is the aim, but Cal+2 had an obvious story this year that traders started to take more of a view on as we got into Q4. Front-month volumes were obviously strong as well, due to the fact that we got some volatility back, and the market had to manage some already large exposures. Volatility breeds liquidity, and from that brings more volume. As long as the market continues to stay interesting on the spot market in 2019, I see no reason why these volumes will dip, but if we see this year what we saw in the first five months of last year, then the front volumes will dry up a touch, with more emphasis put on the months leading up to, and at the start of, 2020, as that q1-20 is a tough one to call at the moment across the board.
Where do you see the greatest potential for growth, clean or dirty?
I still see the dirty markets having more of a drive this side of the New Year. There are more counterparts looking at the dirty side of things, but hopefully, as the scrubber story becomes more prevalent on both sectors, owners will start coming out of the woodwork on the clean side too. Purely on a catch-up basis, I would hope that clean comes into its own, with a look at open interest in 2020 for tc2,5,6,14, there is plenty of room for growth here.
Has the perceived complexity of tanker FFA trading (WS etc.) held the market back?
The age-old argument of WS or $/tonne quoting will always be there. If we get rid of WS, then we get rid of the link to the physical, if we stick with it, then some counterparts who aren’t familiar with the physical can struggle to grasp it. But, we are at an age now where we have everything at our fingertips for current year trading, so can tailor the way we quote prices to different players, whether it be WS, $/tonne or $/day. So I don’t think our pricing structure should hold this market back, we have all the tools to push it on, including a web-based platform that converts WS and $/tonne numbers into live earnings that move throughout the day due to a live fuel curve. This is available to a wide audience/anyone with a login which goes a long way to de-mystifying the market.
How do you see the upcoming Sulphur Cap 2020 regulation impacting the FFA market?
With different views comes opportunity, and there is plenty of opportunity here if you think you know better than the person across the table from you. The Sulphur Cap is still not a sure thing when it comes to its pricing structure, and if it were going to be an issue then there wouldn’t be as much open interest as there is already for 2020.
How do you hope to attract new entrants to the market and where do you see new growth coming from?
I think owners are lacking cover for MRs and LRs vs what we see on the dirty side of things… the 2020 debate is getting more people thinking about paper to manage freight rate risk. Obviously, a stronger rates market in 2019 would help that cause too, that would make attracting new entrants easier, but its far from guaranteed. The Eastern players have come into their own a bit more in 2018, but with the introduction of these USG VLCC and Aframax routes recently, we have seen more questions come from the US. That pool is relatively untapped in recent times, but with a few more routes relevant to their needs, you should see some decent growth coming from across the pond this year.
What added value do the brokers bring to the market?
We as brokers have a duty to make sure all trades are executed at the best price and in as fairer fashion as possible, and will always standby that. We are there to bring to the attention of traders any added value that they may have missed. We are also responsible to bring in new counterparts and increase liquidity as best we can to allow this market to grow.
Angus will be speaking at the FFABA Tanker Freight Derivatives Forum on 25 February as part of a panel discussion on Sulphur Cap 2020, volumes vs cargo flows, new contracts & benchmarks updates. For more information click here.
About the FFABA
The FFABA is an independent association of FFA broking Baltic Exchange members formed in 1997 and serviced by the Baltic. The Association runs regular forums with the Baltic Exchange to promote FFA trading and bring together market participants.
Chairman (Wet): Angus Procter (Braemar ACM-GFI)
Chairman (Dry): John Banaszkiewicz (FIS)
- Promote the trading of Forward Freight Agreements (FFAs)
- Promote high standards of conduct among market participants
- Liaise with the Baltic Exchange to ensure the production of high quality indices for use by the freight futures industry
- Provide a forum for brokers and principals to resolve problems as they arise
- Develop and promote the use of standard contracts
- Develop the use of other ‘over the counter’ and exchange traded derivative products for freight risk management
- Member update: 16 January
The following company has applied for Corporate Membership:
Company Individual Concord Maritime LLC Mr J Hurley Olympia Shipbroking Inc Mr C Lymperopoulos
The following individuals have applied for membership of an existing member company:
Company Individual BACA – The Baltic Air Charter Association
Mr C Lietaert Mr E Costa Mr W Barrett Clarksons Platou Miss N Topalovic Clyde & Co LLP
Mr C Wang Miss E Steel Mrs M Karali
Mrs N Kanavou International Association of Independent Tanker Owners Mr D Dimopoulos Fearnleys A/S Mr D Kilen
Any comments should be passed to Karen Karanicholas by 23 January 2019.
- Can an arresting party freely-release an arrested vessel?
The Singapore High Court held in The “Long Bright”  SGHC 216 that where the court has ordered the sale of an arrested vessel, the arresting party is not entitled to release and stop the judicial sale of the vessel as a matter of right. It must apply to the court for a discharge of the sale order before releasing the vessel.
This case provides helpful guidance on the Singapore approach in determining whether or not to discharge a sale order for an arrested vessel. In a simple case where there is only one claimant against the vessel, an application for the discharge of the sale order may likely to be straightforward.
However, such an application may be more challenging where interests of multiple claimants against the vessel have to be considered. If all the claimants (other than the arresting party) unanimously oppose the application and they can show that their interests would be significantly prejudiced by the discharge of the sale order, these factors may well weigh heavily with the court against discharging the sale order, even if the arresting party’s claim has been paid.
The plaintiff shipyard arrested the vessel Long Bright in Singapore for its claim against her owners, and obtained an order for the vessel to be sold pendente lite. There were other claimants with claims against the vessel. After the vessel had been advertised for sale, the shipyard filed an application to discharge the sale order and to release the vessel. In this regard, the shipyard made, inter alia, the following submissions:
- The shipyard’s claim had been settled by the mortgagee of the vessel and therefore, the shipyard no longer had any claim against the vessel or her owners. Further, the mortgagee planned to commence a separate in rem action to arrest the vessel for its own claim;
- Where a plaintiff or arresting party seeks the release of an arrested vessel following the settlement of its claim, the release is as of right, and is not conditional upon the discharge of the sale order; and
- Since the shipyard was entitled to discontinue the action without leave (given that no defence had been filed), the sale process could not continue once it filed a notice of discontinuance. Therefore, the release of the vessel could not be conditional on the sale order being discharged.
The court made clear that there are limits to an arresting party’s freedom to release an arrested vessel where a judicial sale order of the vessel has been made
The Singapore High Court rejected the shipyard’s afore-said submissions and held:
The limits to an arresting party’s freedom to release an arrested vessel
An order for the sale of an arrested vessel would have to be first discharged before the arrested vessel may be released, even if the party seeking the release is the arresting party. It is not entitled to unilaterally stop the sale without going back to the court to seek a discharge of the sale order.
A judicial sale is not halted simply by the arresting party filing a notice of discontinuance. In any event, the court may, if necessary, set aside the notice of discontinuance filed.
Considerations relevant to the discharge of the sale order
In deciding whether to discharge an order for sale, the court takes into account the interests of all persons with in rem claims against the vessel, including the following matters:
- Whether the other claimants against the vessel oppose the discharge of the sale order;
- The delay and costs involved in discharging the sale order and restarting the sale process (i.e. for the vessel to be released and re-arrested by another claimant in Singapore); and
- Whether any advantages would be gained by discharging the sale order and restarting the sale process.
Having considered the facts of the case, the Court in The “Long Bright” exercised its discretion to discharge the sale order. In doing so, the court considered the fact that if vessel were released and re-arrested by the mortgagee, there would likely be a delay of three months or more in payment out of proceeds of sale to the claimants. However, the vessel was only six years old and there was no evidence that the anticipated delay would result in a significant erosion of the vessel’s value. Moreover, if the sale process was restarted, the priorities and recovery prospects of the other claimants would not be impacted and the vessel might possibly obtain a higher price.
In The “Long Bright“, the court made clear that there are limits to an arresting party’s freedom to release an arrested vessel where a judicial sale order of the vessel has been made. It does not follow as a matter of course that the arrested vessel will be released simply because the arresting party’s claim has been settled and it is the party seeking the release of the vessel. It would be prudent for the arresting party to apply to the Court to discharge the sale order before seeking to release the vessel.
In The “Long Bright“, the court also clarified that it may allow (i) the sale process to proceed; and (ii) applications to be made for payment out of the vessel’s proceeds of sale, in the arresting party’s in rem action even if the arresting party no longer has a claim against the vessel. In that event, it would be prudent for the arresting party to apply to the court for directions to be given to safeguard its interests, such as to make provisions for the costs and expense of keeping the vessel under arrest until the completion of the sale.
Ik Wei Chong and Eric Wong are Partner/managing director for Asia and Associate respectively at Clyde & Co, a global law firm that focuses on five core sectors: transport, trade and commodities, insurance, infrastructure and energy. Contact Mr Chong at firstname.lastname@example.org or on +86 21 6035 6100.
The Baltic Exchange will hold its next Freight Derivatives & Shipping Risk Management course on March 11 and 12 in London in the UK. More information can be found here.
- Baltic Exchange quiz night
The next Baltic Exchange quiz night takes place on 7 February at Balls Brothers Adams Court.
The event is capped at 80 people and regularly sells out so we recommend attendees book early.
Tickets are priced at £15 per person, 6 people per team.
For more information or to book your tickets, click here.
- Baltic Irish Night: 14 March
With over 400 attendees from across the globe, the Baltic Exchange Irish Society dinner is one of the best attended shipbroker events of the year.
The night opens with a drinks reception in the Porter Tun Room, before dinner in the Grand Hall. Toasts and speeches follow from the Chairman and guest speaker, before the traditional sing-along.
The event will take place at The Brewery (EC1Y 4SD) from 6pm on 12 March 2020. Tickets are now available at £95pp. For further details or to purchase tickets, please contact Irish Society Treasurer, John Ollett, email@example.com / 02071993497 / 07794 274 885.
- Baltic ICS January lectures
The Baltic Exchange and Institute of Chartered Shipbrokers (ICS) will be presenting the third in the series of lectures on 30 January in Singapore, Shanghai, Athens and London.
Intended to support and develop brokers and operations professionals, the series will examine topical issues facing those working in chartering and operations roles, offering advice on best practice in critical situations and insight into the changing patterns affecting the shipping sector.
The third lecture will focus on economic cycles & shipping. Join shipping thought leaders for an open discussion on freight market cycles; how have trends in cargo flows changed and what has the impact been from the vessel supply side, as a result of the evolution of the shipowner and the ever-changing ROI horizons for their investors.
Guest speakers include:
Singapore | 30 Jan | 13.00
Global Head of Shipping, Anglo American
Shanghai | 30 Jan | 13.00
CEO, Asia Maritime Pacific
Athens | 30 Jan | 18.30
Director, Ursa Shipbrokers
*In celebration of the New Year, the Athens lecture will be held on the ‘Hellas Liberty’. The seminar will be followed by the cutting of the Vasilopita.
London | 30 Jan | 13.00
Dr Martin Stopford
Non-Executive President, Clarkson Research
This event is free to Baltic and ICS member companies. Those interested must register by email to firstname.lastname@example.org (reference: BXICS203)
View the flyer here.