- New Baltic training courses: IMO 2020 bunker hedging and FFAs for LNG
The Baltic Exchange is launching two new half-day training courses in Singapore this February as part of its Baltic Academy programme. Bunker Hedging Post IMO 2020 (4 Feb) and Managing LNG Freight Risk (5 Feb) will be led by risk management specialist Mikal Boe.
Bunker Hedging Post IMO 2020 is for bunker buyers, traders and suppliers wishing to understand how IMO 2020 may affect the hedging of bunker fuel prices as the ‘old’ contracts disappear and ‘new’ ones emerge. Attendees will learn best practices in bunker fuel price risk management, using new low sulphur fuel oil contracts and gasoil contracts as well as basis risk between ports and how to manage regional discrepancies.
Bunker risk management essentials
– The economics of a bunker hedge in a COA and for bunkers on redelivery
– Classic signs of when to hedge and when to float on the spot market
– Tried and tested hedging strategies – practical examples
– How IMO 2020 changes bunker hedging,and why
Hedging bunker price exposure with new contracts
– Term structure and oil market dynamics
– The new low sulphur fuel oil contracts, market mechanics post 2020
– Low sulphur marine gasoil contracts
– Basis risk and regional price differentials, best practice hedging
– New hedging strategies – practical examples
– Execution, clearing, collateral and cash management
Cost: USD 600/SGD 800
Managing LNG Freight Risk Using Futures teaches participants how to trade and use FFAs effectively to manage pricing risk from volatility in LNG freight rates. This half day course is designed to help build confidence in using new indices from the Baltic Exchange in managing risk for shipping and is suitable for both LNG and shipping company executives.
The Baltic BLNG Index
– Comprehensive understanding of the BLNG Baltic Index and Index methodology
– The role of panels and integrity of the market
– Pricing of the Index on time charter and voyage charter
– Calculating ‘Basis Risk’ between the LNG Index and main LNG trading routes
– Index Settlement mechanisms and correlations
– Term structure of the LNG forward curve
– Contango, backwardation, inversions and seasonality
Putting it all together with FFAs
– Composition, construction and use of an LNG FFA derivatives contract
– Practical application of LNG FFAs to freight contracts and time charters
– Calculating pricing risk, calendar risk and cash flow
– Settlement mechanisms
– Leverage and Margining and mark-to-market
– Stress testing
– Examples and practical uses of an LNG FFA contract
Cost: USD 600/SGD 800
For further details and booking, please contact Bill Lines. Email: email@example.com or call +44 (0)20 3326 8450
- Baltic Exchange Remembrance Service 2019
Members and friends are invited to attend the Baltic Exchange on 8 November for the annual Remembrance Day service. This year we shall be joined by musicians from the City of London Brass Band. Those interested are invited to join us from 10.45.
The Service takes place at the War Memorial in the lobby area. Coffee and biscuits will be available in the Baltic Exchange bar from 10.30.
Royal British Legion poppies will be available in the Foyer and in the Bar.
Supporting the Royal Legion Poppy Appeal
All Baltic Exchange staff/members are authorised by Nick Pentreath to issue poppies and receive donations in the streets around St Mary Axe from Tuesday 29 October. Nick will be at the Baltic Exchange that day with a supply of poppy trays and tins and would be pleased to receive some assistance from the membership. For more details, contact Nick on the details given below.
Corporate donations to The Poppy Appeal most welcome.
Nick Pentreath, Capricorn Shipbroking
Tel. 020 7283 7975
- Member update: 6 November
The following individuals have applied for membership of an existing member company:
Company Individual Citigroup Global Markets Ltd Mrs A Chakhvadze Fearnleys A/S Mr K Stevneboe ICMA Centre Mr A Klokkaris Ms K Flegka Mrs X Wu Mr A Oliinyk Miss Y Ding Miss Z Xin Ms Y Shen Mr X Tong Mrs S Harten Mr S Batsolakis Mr S Ding Mr P Hurley Mr P Giannakopoulos Mr M A Tsoukalas Mr K Chrysafis Mr J Pittas Miss E Diamantara Mr A Theodorakis Southern Star Shipping Co Inc Mr G Katsaounis
Any comments should be passed to Karen Karanicholas by 13 November 2019.
- St Andrew’s Day lunch
The Baltic Caledonia Society would like to invite members and guests to its St Andrew’s Day (29 November) lunch at the London Scottish Regiment HQ.
Starting at 12.15pm, the lunch will run all afternoon with guest speaker Will Allen in attendance in addition to the customary piper.
Tickets are £95 per person which includes one bottle of wine and large quantities of smoked salmon, haggis, neeps and tatties as well as a selection of Scottish cheeses.
A charity draw will take place before proceedings come to a close at around 6pm.
For more information and to book, contact Mike Robson.
- Christmas in Athens
Members are invited by the Chairman of the Baltic Exchange, Denis Petropoulos, to join him at the Baltic’s annual Athens Christmas Reception at the Hilton Galaxy Rooftop Bar from 6 pm on 5 December.
We look forward to welcoming members and invited guests from across the Greek market for cocktails and canapés to celebrate the start of the Christmas Season.
Those interested in attending are invited to register on our event page here.
- FFA basics: Baltic/ICS Lunchtime Lecture, Singapore
Kenneth Ng, Director of Digital Services at the Singapore Exchange (SGX), will look at the basics of FFAs and how they can be used to manage shipping market volatility and risk in the Baltic/Institute of Chartered Shipbrokers Lunchtime Lecture, Singapore, 27 November.
Kenneth has held various portfolios in commodities and derivatives units covering product development, management and sales.
12:15 – 13:00 Light food and drinks, networking and mingling
13:00 – 14:00 Kenneth will cover the basics of FFA, followed by short Q&A
This event is complimentary for all Baltic and ICS members to attend on a first-come, first-serve basis. All others will need to pay a fee of SGD 100 to attend.
Please send the RSVPs via: https://forms.gle/ucLi22aWLhEsh6cNA
- Baltic/ICS lunchtime lecture: Ship Finance
The next Baltic Exchange/Institute of Chartered Shipbrokers lecture in London (13 November at the Baltic Exchange) will focus on ship finance and will be delivered by Tony Foster, CIO of Marine Capital. The lunchtime lecture will focus on how asset owners and others with exposure to freight rates raise capital today; how does it affect an owner’s chartering decisions as well as related streams; why are we seeing an increasing number of charterer- owner JVs and what the motivations are for these sort of tie ups?
The popular lecture series is aimed at building wider industry knowledge amongst younger chartering and operations staff.
Tony has over 35 years’ experience in the shipping industry (including 13 years spent in Asia) spanning ownership, commercial management, broking and fund management. Together with partners, Tony has successfully bought, developed, led and sold numerous shipping businesses including ship owning, technical management, consultancy and shipbroking. One such business was merged into a pre-IPO entity which became Pacific Basin on listing, following which, Tony took up a management role in Pacific Basin and became a shareholder. After the float of Pacific Basin (which is listed in Hong Kong), he founded Marine Capital in November 2003. Throughout his career, Tony has bought, sold and chartered hundreds of ships across many sectors and since forming Marine Capital, he has led and executed a number of shipping transactions both on behalf of an in partnership with external investors. Tony graduated from Oxford in 1976 with an honours degree in jurisprudence.
Contact firstname.lastname@example.org to book your place.
- Next Baltic/ICS Shanghai lecture focuses on FFAs
The next Shanghai Baltic Exchange/Institute of Chartered Shipbrokers lecture takes place on 13 November with a focus on freight derivatives. The lunchtime lecture will be delivered by Steven Jia, Executive Director at Augustus Maritime. He will discuss how to manage freight rate risk and using Baltic indices to benchmark physical exposure and how to avoid basis risk when transferring exposure between physical and FFA markets.
Steven Jia has an MBA from HKUST Business School and a bachelors degree in Shipping Mangement from Singapore Management University. He has worked at Augustus Maritime since 2011 where he heads up shipping business. He has 18 years of shipping industry experience and five years of trading FFAs and fuel futures.
For further details, please contact Ying Sun. email@example.com
- “Uncertainty” overriding theme for trade growth
Lacklustre seaborne trade growth figures should serve as a “warning” that national policies can have a negative impact on the maritime trade and development aspirations of all.
UNCTAD secretary-general Mukhisa Kituyi made that comment in response to growth of just 2.7% in 2018, down from 4.1% in 2017 – the headline figure of the United Nations’ latest Review of Maritime Transport 2019 (RMT).
Containerised trade growth was particularly hard hit, falling from 6% in 2017 to 2.6% in 2018.
Mr Kituyi blamed the dip in maritime trade growth on several trends including “a weakening multilateral trading system and growing protectionism”.
In a five-year projection window, UNCTAD sees international maritime trade increasing by 2.6% in 2019 and then continuing to rise at a compound annual growth rate of 3.4% over the 2019-2024 period. The UN body bases these figures on the estimated income elasticity of maritime trade over the 2006-2018 period and the latest growth in GDP forecast by the International Monetary Fund for 2019-2024.
This projected growth falls within the range of some existing forecasts and is consistent with historical trends: maritime trade increased at an annual average growth rate of 3.4% between 2006 and 2018.
In sector-specific forecasts, containerised and dry bulk trades are expected to grow at a compound annual growth rate of 4.5% and 3.9% respectively over the 2019-2024 period. Tanker trade (combined crude oil, refined petroleum products, gas and chemicals) is projected to grow by 2.2% during the same period.
“Uncertainty remains an overriding theme in the current maritime transport environment,” the report said.
Growth will also be affected by trends in market segments that suffered setbacks in early 2019, including disruptions to iron ore trade caused by Cyclone Veronica in Australia and the severe disruption caused by the Vale dam incident in Brazil.
Grain and containerised trades, meanwhile, will be hardest hit by ongoing trade tensions, while crude oil shipments from the Atlantic basin to Asia are expected to support tanker volumes. However, it is unlikely that this will offset sanctions on Iran and Venezuela, and production cuts by the Organization of the Petroleum Exporting Countries, which are all likely to put pressure on tanker trade.
“Overall, the outlook for global maritime trade growth will be affected by the degree and speed at which some of these trends unfold,” said UNCTAD.
This year’s RMT raises particular concern about the effect of regionalisation of trade flows and the trend towards restructuring supply chains, recommending the following actions:
- Close monitoring of demand side risks and assessment of their implications for maritime transport and trade of developing countries;
- Favouring of measures that help boost economic growth, support trade, strengthen resilience and foster environmental sustainability;
- Revitalisation of trade growth and promotion of the participation of developing countries in global value chains;
- Encouragement of product and market diversification to better cope with adverse trade shocks, including the impacts of heightened tariffs and trade tensions;
- Adoption of a co-ordinated and multilateral approach to resilience building, including addressing the risks of natural disasters and the impacts of climate change;
- Promotion of better planning methods and approaches to ensure more flexibility when dealing with uncertainties and rapid shifts in production, trade and shipping patterns; and
- Fostering policies that anticipate potential disruptions and associated response measures that are tailored to countries’ developmental challenges and needs.
There have also been significant changes on the ship supply side noted in the latest RMT, with carriers abandoning their “quest for ever bigger ships” and instead “increasingly eyeing growth prospects associated with the landside of operations”.
Ports and shipping interests, UNCTAD notes, are focusing more attention on expanding activities to inland logistics and tapping potential underlying sources of revenue. “Efforts by carriers to emerge as freight integrators and recent moves by some major global container lines to acquire regional carriers could be indicative of industry efforts to adapt to changing conditions,” says the report.
In early 2019, the total world fleet stood at 95,402 ships, representing 1.97 billion dwt. Bulk carriers and oil tankers maintained the largest market shares of the world fleet at 42.6% and 28.7% respectively.
Total capacity has grown by 2.6% compared with the beginning of 2018. That said, the capacity growth rate has been declining since 2011, except for a slight increase in 2017, and remains below the trend for the past decade.
One notable bright spot in the report is the expanding liquefied natural gas (LNG) sector, largely off the back of the widescale promotion of cleaner energy sources. In fact, a sharp decline in oil trade growth has been partly offset by rapidly expanding LNG and LPG trade growth. In China alone, LNG imports increased by over 40% in 2018.
LNG trade growth led gas carriers to be the “most dynamic segment of the world fleet” in 2018, experiencing the highest growth rate of 7.25% of dwt. UNCTAD expects this supply-side trend to continue given heightened environmental concerns and the pressure of the maritime sector to switch to cleaner fuels.
Summarising the sentiment of the 2019 report, UNCTAD commented that a “new normal” for maritime transport is in the making, with effects permeating all aspects of the industry, from demand to supply, markets, ports and regulatory frameworks.