S&P Dow Jones Indices, the world’s leading index provider, today announced the launch of the S&P GSCI Freight Index Series, expanding S&P DJI’s suite of S&P GSCI single-commodity indices.
The S&P GSCI Freight Indices provide transparent, reliable and publicly available performance benchmarks for the Dry Bulk freight markets. Dry bulk commodities refer to raw materials that are shipped in bulk for global manufacturing and production such as iron ore, coal and grain. Dry bulk is the largest sector in the shipping industry and is dominated by two vessel types: Capesize and Panamax which are the largest and second largest standard sizes of the dry bulk carriers.
The indices utilize the Baltic Exchange’s monthly and quarterly forward freight agreements (FFAs) prices. FFAs are cash-settled futures contracts and the main derivative instruments for the physical shipping markets. The indices are the market’s first transparent indices based on the FFAs.
The Index Series includes the:
S&P GSCI Freight Capesize (Monthly)
S&P GSCI Freight Capesize (Quarterly)
S&P GSCI Freight Panamax (Monthly)
S&P GSCI Freight Panamax (Quarterly)
Fiona Boal, Head of Commodities and Real Assets, S&P Dow Jones Indices said, “Disruptions to global supply chains over the last few years have put global freight markets in the spotlight, highlighting their important link in the chain of the world economy and contributions to international trade. We are pleased to have collaborated with the Baltic Exchange and TonnEdge to fill a market gap and bring the S&P GSCI Freight Indices to life. As global investors increasingly seek to diversify their investments and look for alternative vehicles to tap into niche market segments, this index series can be a meaningful gauge for the final value of this commodity.”
The dry bulk FFA market is highly liquid. Dry bulk FFA volumes hit 2,524,271 lots in 2021, up 61% on 2020, according to the Baltic Exchange. The FFA volumes based on both Capesize and Panamax vessels accounted for approximately 90% of the underlying physical dry bulk market flows. The S&P GSCI Freight Indices, which also draws from TonnEdge’s unique market knowledge in the shipping industry, now provide the market efficient tools through which financial market participants can monitor, measure and capture opportunities in this dynamic market segment.
Mark Jackson, Baltic Exchange Chief Executive Officer said, “Reflecting expected changes in supply and demand, Baltic Exchange forward pricing for the dry bulk freight market is an important tool for traders and shipowners looking to manage their exposures to volatile markets. Our assessments are provided by a panel of leading FFA brokers and are based on contracts listed by the Singapore Exchange (SGX) and the European Energy Exchange (EEX) clearing houses.”
Professor Nikos Nomikos, TonnEdge and Bayes Business School, London said, “Shipping is an important link in the global economy. The market for freight derivatives has grown significantly over the last few years and is now an integral part of the global shipping markets. The development of S&P GSCI Freight Indices provides opportunities for connecting the global investment community with the shipping markets.”
