- First Atlantic LNG freight swap trade
LNG traders JERA Global Markets and Vitol have executed the first Atlantic LNG freight swap against the Baltic Exchange’s BLNG3 assessment in a bilateral trade arranged by Affinity Financial Products.
The BLNG3 assessment provides a freight rate benchmark for LNG shipments between Sabine Pass and Tokyo. The benchmark is on a time charter equivalent basis with a panel of independent shipbrokers providing headline time charter rates and a ballast bonus and/or position fee assessment to give an effective rate paid by a charterer on round voyage terms.
“Following on from our initial trade in July when the Baltic’s BLNG1 assessment went live, we are very pleased to have been able to arrange a bilateral trade against the BLNG3 route,” said Benjamin Gibson, Head of LNG Derivatives at Affinity. “Interest in BLNG3 has been off the charts as this trade lane links an increasingly liquid spot market in the Atlantic and the key demand centre for LNG in Japan. As the LNG market continues to commoditise, freight is now catching up with the cargo in terms of transparency and the ability to trade BLNG3 will become an important tool along with JKM and Henry Hub.”
Baltic Exchange Chief Executive Mark Jackson added: “Our BLNG3 route only went live in mid-August and we’re delighted to see the first trade settled against it. The Baltic’s LNG assessments are being quickly adopted by this developing market as an accurate and reliable benchmark.”
Sarah Behbehani, JERA Global Markets SVP LNG commented: “As part of JERAGM’s efforts to increase the transparency of the LNG market, we are very happy to confirm that we have concluded the first LNG freight swap against the Baltic Exchange’s Sabine Pass to Tokyo index. The management of LNG freight price exposure is a key element of portfolio optimisation and risk management, however LNG freight derivatives have been slower to develop compared to LNG and gas-linked financial products. Freight exposure arising from US LNG is of particular importance for the development of the market, given the US Gulf Coast’s position as a marginal source of supply across the Atlantic and Pacific basins.”
Affinity confirmed that the trade was done over-the-counter (OTC) and executed bilaterally using an ISDA contract.
Gibson added that “further bilateral trades will help develop the understanding and adoption of freight benchmarks within the industry. We are delighted to have supportive counterparties such as JERA and Vitol who will transact on this basis and, furthermore, the market is engaged with several Exchanges who have expressed an interest in listing contracts priced against the Baltic routes.”
Click here to view Baltic Exchange LNG data.
- Baltic Exchange Freight and Commodities Forum: Hamburg
The Baltic Exchange invites Members to its Freight and Commodities Forum in Hamburg on 17 October at the Sofitel Hotel Hamburg Alter Wall.
The event will include discussion and analytical insight from leading industry figures on bulk commodity freight flows, supply-side forecasts, regulatory changes and the bunker spread outlook. Hosted by the Baltic Exchange and including an update on our benchmarks and services, this conference is open for all market participants to attend.
13:00 Registration: Networking lunch
14:00 Baltic Exchange Update: Mark Jackson – CEO
14:20 FFA Market Update – John Banaszkiewicz, Chair – FFA Brokers Association (Dry)
14:25 Bulk Commodities and Demand Side Outlook: Capt. Amrit Singh – Lead Shipping Analyst, Refinitiv
15:00 Freight Market Outlook Keynote: James Frew – Director of Consultancy, MSI
16:00 Industry Sessions; rotating break out discussions covering:
- Session A: Supply-Side Dynamics; meeting demand: Led by Chris Hughes – Global Lead, Shipping Markets – Lloyd’s Register with Amrit Singh.
- Session B: Price Discovery; indexation, use of indices and minding the gap: Led by Philippe van den Abeele, CIO – Consortium Capital Management with James Frew.
- Session C: Doubling Dry FFA Volumes and Building Route Liquidity: Led by John Banaszkiewicz, MD, Freight Investor Services with the FFA Brokers Association (Dry).
17:00 Industry Sessions Feedback Panel
18:00 Drinks & Dinner hosted by the FFABA DRY @ VLET an der Alster
- YBA night: Hamburg
The event is open to shipping market participants in Hamburg as well as those attending the Forum.
Attendees are invited to join us from 6pm.
Address: Hörsaal Hamburg Talstraße 12, 20359 Hamburg
- Celebrating 150 years of lifeboats at Salcombe
Two statues have been designed to commemorate the 150 year Anniversary of the Kingsbridge and Salcombe RNLI.
The sculpture unveilings took place on Saturday 21 September, with the first in Kingsbridge and the second shortly after in Cross Gardens.
The Baltic Exchange is a longtime supporter of RNLI Salcombe, funding the Watson class lifeboat The Baltic Exchange in 1962, which was replaced by the Tyne class The Baltic Exchange II in 1988, and, most recently, the Tamar class The Baltic Exchange III in 2008.
Speaking on the event, Baltic Exchange CEO, Mark Jackson, said:
“This unveiling is a wonderful acknowledgment of the incredible work that the RNLI has done over the past 150 years. We have for many of those years proudly supported the brave men and women of the RNLI, who have, and continue to help keep seafarers safe off British shores.”
- Baltic supports UK maritime sector drive to decarbonation by 2050
The Baltic Exchange has co-signed a letter sent to UK the government by Maritime UK asking it to invest in a sustainable “blue economy”. This will allow industry to match the UK’s 2050 carbon-neutral pledge. It follows former prime minister Theresa May’s commitment to the UK producing net zero greenhouse gas emissions by 2050 becoming the first G7 nation to make such a promise.
Now maritime organisations in the UK are pledging a similar commitment to carbon neutrality, and asking the government to invest in new technologies to help them achieve it.
The letter reads:
We only have one world, and it is the responsibility of all of us to safeguard it for future generations to live fulfilling, healthy and happy lives. The maritime sector can make a special contribution by developing a sustainable Blue Economy which protects our marine and coastal environments whilst delivering economic and societal benefits.
The global ocean economy will be worth $3trillion by 2030. While this presents enormous growth opportunities for communities, industry and governments across the world, it also calls for the greatest environmental care and sensitivity.
For we must learn the lessons from the economic exploitation of other environments and ensure that the development of the ocean economy does not harm this most precious of domains.
A strong, sustainable and carefully managed Blue Economy will deliver prosperity for all peoples, in particular island and coastal states most at risk from the effects of climate change.
We believe that we can deliver a sustainable Blue Economy with the combined aims of economic growth, societal development and the environmental protection of our marine and coastal environments. Already, maritime transport is one of the most sustainable ways of moving goods from place to place, being much more efficient than both trucks and aircraft. Setting and delivering ambitious sustainability targets will stimulate new markets, products and services required to achieve our environmental goals.
The UK maritime sector is committed to tackling the impact on our oceans of climate change, pollution and other harmful activities.
And we are committed to delivering sustainable economic value to the communities we serve and helping to transform society for the better.
We, the undersigned leaders of the maritime sector, therefore commend the government’s leadership in cutting greenhouse gas emissions and commit ourselves to supporting decarbonisation by 2050.
To realise that target, industry will need to invest, and we call upon government to do the same, most particularly in support of new and viable decarbonisation technologies and the critical infrastructure to support their implementation. Industry and government have established the UK’s national centre for maritime innovation; Maritime Research and Innovation UK. We now call on government to deliver substantial investment to support its work, just as it has for aviation and automotive. Equally, there needs to be investment in greening our maritime infrastructure.
Finally, we ask government to enact enabling rules and regulations which will accelerate the achievement of our goals.
Working together, government and industry will deliver decarbonisation. We cannot afford to fail.
Chair, Maritime UK
Maritime UK members: British Marine, British Ports Association, Cruise Lines International Association UK & Ireland, The Baltic Exchange, Institute of Chartered Shipbrokers, Trinity House, Maritime London, Mersey Maritime, Nautilus International, Seafarers UK, Society of Maritime Industries, Solent LEP, UK Chamber of Shipping and UK Major Ports Group.
- FFA training courses: London
There are still limited places available on the Baltic’s freight derivatives training courses in London (7-10 October).
Freight Derivatives & Shipping Risk Management
An overview of risk in the shipping business. Topics covered include freight rate risk management, derivative instruments, freight rate options, bunker and financial risk management, ship price risk management, Value at Risk and credit risk.
Advanced Freight Modelling & Trading
A focus on pricing freight options, modelling freight rate dynamics, constructing forward curves, modelling freight rate volatility as well as hedging and trading strategies.
For full details please visit www.balticexchange.com/other-services/training-2/
- Member update: 25 September
The following company has applied for Corporate Membership:
Company Individual 1991 Shipping Ltd Mr J W Palmer PhosAgro Logistics AG Mr V Makhlin Saudi Chevron Phillips Co
Mr S Almuqbel Mr M Al-Shami
The following individuals have applied for membership of an existing member company:
Company Individual Barry Rogliano Salles Mr A Gelli COSCO Shipping Bulk Co Ltd Mr Y Wang Galbraith’s Ltd
Miss L Dervenaga Ms A Markou
Mr N Moro Mr J Seed Mr T Thomas Glencore International AG Mr C Zhu J Lauritzen A/S
Mr W Su Mr C A Wegeberg Profision Shipping Capital Management Limited Mr N Rainy Brown Springfield Capital Management LLC Mr N Pal
Any comments should be passed to Karen Karanicholas by 2 October 2019.
- Passing of former Baltic Member, Tony Hopkins
Members will learn with regret of the death on 22 September of Anthony (Tony) Hopkins.
Mr Hopkins was first elected to the Baltic Exchange on 19 May 1953 for Jardine Matheson Group. In 1955 he was elected a member for Howe Robinson (he was also a Director of Howe Robinson), until becoming a retired member in 1989.
Funeral arrangements are awaited.
- 2020 Baltic diaries now available to order
Baltic diaries and pocket diaries for 2020 are now available alongside other items via the Baltic’s online shop.
- Lowdown on Incoterms 2020 overhaul
This ninth revision of Incoterms is changed in style and substance. The revisions improve certain aspects of Incoterms 2010 and address issues which were not prevalent in 2010. The introduction to Incoterms 2020 includes a detailed explanation of how to choose the most appropriate Incoterms rule for a sale contract.
Incoterms are a collection of internationally recognised standardised trade terms published by the ICC and widely used in domestic and international sales. Incoterms cover various practical elements of a sale contract such as the primary obligations of the seller and the buyer; the responsibilities of each; time of delivery and the transfer of risk. They also deal with insurance, export and import clearance and the division of other costs pertaining to the delivery of goods.
The ICC’s revision of Incoterms aims to respond to changes in the market so that they continue to be relevant and useful to global trade. With this particular revision, the ICC aims to take account of:
- The growth of the global economy and greater access to markets worldwide
- Increasing attention to security in the transportation of goods
- The need for flexibility when considering insurance coverage, depending on type of goods and transport
- Calls from banks for an on-board bill of lading in some financed sales under the Free Carrier (FCA) rule
For existing contracts, Incoterms 2010 will continue to apply even if performance of the contract will take place in 2020 unless the contract says otherwise. For contracts entered into between September 2019 and January 2020, it is prudent for the parties to state which set of Incoterms is to apply, especially if performance will take place after 1 January 2020.
After 1 January 2020, courts and arbitrators can be expected to assume that any reference to Incoterms in new contracts is intended to be a reference to Incoterms 2020, unless there is evidence to the contrary.
The relevance of Incoterms 2020 depends on the contract terms used. For example, GAFTA, FOSFA and sugar (SAL and RSA) contracts do not incorporate Incoterms. Any parties trading only on those contract terms without amending them to incorporate Incoterms will obviously be unaffected by the changes in Incoterms 2020. Standard petroleum product contracts refer to Incoterms, as do many ethanol, coal and metals contracts. Parties dealing with such contracts will need to:
- Check their standard contract forms
- Consider the changes introduced by Incoterms 2020 and whether they wish their contracts to incorporate Incoterms 2020 or an earlier version of Incoterms (or none)
- Make any necessary consequential changes in the standard forms for new contracts (for example, changing ‘DAT’ (Delivered at Terminal) to ‘DPU’ (Delivered at Place Unloaded))
- Inform counterparties and trading/execution departments of the changes to Incoterms and any revisions to contract documentation
- Bills of lading with an on-board notation in FCA deliveries
- Different levels of insurance cover between Cost Insurance and Freight (CIF) and Carriage and Insurance Paid To (CIP)
- Acknowledging the use by parties of their own transportation in FCA, Delivered At Place (DAP), DPU and Delivered Duty Paid (DDP) deliveries
- The inclusion of security-related requirements within carriage obligations and costs
- Detailed Explanatory Notes for Users
- The arrangement of provisions relating to costs
- Change of ‘DAT’ to ‘DPU’
The table below sets out the substantive changes in more detail:
Amendments to Incoterms 2020 1. Bills of lading with an on-board notation in FCA deliveries
In FCA deliveries, parties (or their financing banks) often require a bill of lading with on-board notation but, given that delivery on FCA terms is completed before goods are loaded onto the vessel, the seller may not always be able to obtain an on-board bill of lading from the carrier.
Under the new Incoterms, the buyer and the seller may agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller after the goods have been loaded. The seller will then be obliged to tender the bill of lading to the buyer.
The ICC emphasises that, where the above option is exercised, the seller does not take on an obligation to the buyer in respect of the terms of the contract of carriage.
2. Different levels of insurance cover in CIF and CIP
Incoterms 2020 provide for different minimum insurance cover for CIF and CIP deliveries.
Previously, both CIF and CIP required minimum insurance cover at the level of Clause (C) of the Institute Cargo Clauses.
In the new revision, for CIF deliveries, the default position remains the same (that is, Clause (C) of the Institute Cargo Clauses). Parties may agree higher levels of cover if they wish.
However, for CIP deliveries, the seller is now obliged to obtain insurance cover at the level of Clause (A) of the Institute Cargo Clauses (that is, “all risks”). Minimum insurance cover for CIP deliveries has therefore been increased for the benefit of the buyer. Parties are free to agree to have lower levels of insurance cover if they wish.
3. Acknowledging transportation by own transport in FCA, DAP, DPU and DDP deliveries
Incoterms 2010 were drafted on the assumption that, when goods are carried from the seller to the buyer, they would be carried by a third-party carrier engaged by the seller or the buyer. That did not account for situations, particularly in FCA, DAP, DPU and DDP deliveries, where a third-party carrier was not, in fact, required or contracted because the seller or the buyer would use its own transportation.
The new rules now cater for such situations by expressly providing for the arrangement of carriage as well as referring to the making of a contract of carriage.
4. Inclusion of security-related requirements within carriage obligations and costs
Incoterms 2020 aims to establish stronger security-related requirements than its predecessors. Now that security-related concerns are more prevalent in trade, this revision expressly provides for security-related obligations at A4 and A7 of each rule. As mentioned above, costs for these obligations will feature under A9/B9 of each rule.
5. Explanatory Notes for Users
The Guidance Notes that previously featured at the start of the individual Incoterms have now been amended to ‘Explanatory Notes for Users’. The Explanatory Notes set out the fundamentals of each of the relevant Incoterms, specifically:
- When it should be used
- When risk transfers
- How costs are allocated
The Explanatory Notes aim to help users choose the most appropriate Incoterms and provide guidance for interpretation if disputes arise.
6. Arrangement of provisions relating to costs
Costs have been rearranged in the 2020 revision. All costs relating to the various aspects of the sale are now listed at A9/B9 under each of the Incoterms, as well as under the relevant article within the Incoterms to which they apply.
The intention behind this change is to provide users with a complete list of costs in one place, so that the seller and the buyer are more aware of the costs for which each will be responsible under particular Incoterms.
7. Change from ‘DAT’ to ‘DPU’
There is a change to the order of the individual Incoterms in the new revision, so that DAP now appears before DAT to reflect the fact that delivery on DAP terms occurs before delivery on DAT terms.
The term ‘DAT’ has been changed to ‘DPU’, reflecting the fact that the destination for a DAT/DPU delivery could be at any place and not just a terminal. Of course, the place of delivery, if not a terminal, must be appropriate for the unloading of the goods.
As John W.H. Denton, General Secretary of the ICC, said when Incoterms 2020 were released: “Incoterms 2020 rules make business work for everyone by facilitating trillions of dollars in global trade annually. Because they help importers and exporters around the world to understand their responsibilities and avoid costly misunderstandings, the rules form the language of international sales transactions, and help build confidence in our valuable global trading system.”
The importance of Incoterms to trade is beyond doubt, even if many contracts do not incorporate them. To avoid uncertainty and disputes, trading companies should ensure they know the new Incoterms rules and make any amendments to their contracts and general terms and conditions that are necessary. It is important to ensure that the most appropriate Incoterms are selected for each contract and that they are fully understood before they are incorporated. These points are especially important now, as the changes take root.
- An evening with Paralympic sailor Hannah Stodel
Co-hosted with HFW at their London office, BESA is delighted to invite its members and the wider Baltic Exchange community to a special presentation on Wednesday 9 October given by British Paralympic World Champion, Hannah Stodel. Hannah will share the inspiring story of her success and discuss the next challenge she has set herself: to become the first disabled sailor ever to take on the Vendée Globe. Racing 24,000 miles around the world – nonstop and without any assistance – Hannah plans to set three major records along the way.
Registration for the event begins at 5.15pm, presentation at 5.45pm and networking over drinks and canapés at 6.30pm.
About our speaker
Three times World Champion and four times Paralympian, Hannah Stodel was born missing her lower right arm but she is a force unto herself and it has not stopped her from competing in able-bodied competition. Besides her three World Championship titles and scores of other results and awards, she’s been the global leader for reinstating disabled sailing into the Paralympic games and is an ambassador for Ditch the Label (anti-bullying) charity in London. With a fierce determination, Hannah is now undertaking the greatest challenge yet, her personal “Everest of the Seas” by competing in the Vendée Globe. We very much hope you can join us for what should be an interesting and inspiring event.
Please RSVP if you wish to attend (including your intended number of guests) to Philip Bacon (email@example.com). Alternatively please contact Amanda Hastings, BESA Social Secretary, (firstname.lastname@example.org) or Camilla Robertson at HFW (email@example.com).
- BEGS Company Cup 2019
This year’s Baltic Exchange Golfing Society Company Cup will be held on Friday 11 October at West Herts Golf Club.
The event is open to teams of two shipbroking golfers. The best combined Stableford score will be the winner.
The Company Cup format is pretty simple, but has a few minor rules:
- Teams of two, competing in four-balls over one round.
- Stableford scoring system, with the combined score counting to each two-person team.
- Each team does NOT have to consist of employees from the same company, clients/visitors are very welcome.
- Teams can be two principals from the same company or different offices, or a principal and a broker or two brokers.
- There is no limit on the number of teams any one company wishes to enter, the more the merrier.
- Baltic Exchange is sponsoring the hole in one on the Par 3’s, with a main prize of a car and other prizes on the rest
- There will be additional prizes for nearest the pin, longest drive in the rough and longest drive on the fairway.
- Official handicap certificates are not required, but anyone playing off 24 or higher that does not have an official club handicap cannot score more than 30 points.
- This event can contribute as one of the sports for the overall David Bradley Cup winner.
Anyone interested in registering for the Company Cup, please contact James Pendered, it will be on a first-come-first-served basis.
Format (all times are approximate & subject to change)
Noon – Arrival time, bacon roll & coffee
13:15 – Tee off for 18 holes from the first tee
18:30 – Drinks/prize giving during dinner
The cost will be £80/player
Herts WD3 3GG
Telephone: 01923 236484 / Pro Shop: 01923 236866