FIS publishes first airfreight futures forward curve

11 / 07 / 2018

Freight Investor Services (FIS), which specialises in shipping derivatives, has published the first airfreight forward price curve, "beginning a new era of risk management in this $70bn freight market".

FIS has spent 12 months working with index provider TAC Index to develop a "robust methodology" for the airfreight market which accounts for 35% of global trade by value. The launch coincides with recent constraints in air cargo capacity and seasonal changes in pricing in the second half, when rates traditionally rise.

The weekly forward curve covers a basket route for airfreight from Asia to Europe, with another basket from Asia to US to be published next month.

FIS head of strategy Michael Gaylard said: “FIS has been working with a number of buyers and sellers in this market and there is a strong feeling that an over-the-counter (OTC) futures market is workable in the short term.

“The counterparts in this market already have strong bilateral relationships, which means they are comfortable with OTC trading until full clearing is established.”

FIS has "significant expertise" in developing new OTC futures market contracts, having started broking the $15.8bn dry FFA market some 12 years and supporting the development of the $114bn iron ore futures market. FIS believes that the air cargo market "has reached the point where price volatility requires some risk management".

FIS air cargo business development manager Nicola Hughes said: "As we head into the second half of the year, there are three forces​ at play; cuts in airfreight capacity, the effect of rising seasonal demand on prices and the impact of trade tariffs.

“We understand that the market will take time and education to develop, but faced with increased volatility for all users, there is real demand for an  accurate and usable forward curve.”

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