SINCE Freight Investor Services (UK) launched the Air Freight Forward Agreement (AFFA) market in July, a number of top forwarders have been using futures to hedge their forward exposure to fluctuations in prices on the spot market
SINCE Freight Investor Services (UK) launched the Air Freight Forward Agreement (AFFA) market in July, a number of top forwarders have been using futures to hedge their forward exposure to fluctuations in prices on the spot market. 'The trade offers support against weakening cargo revenue and profitability during an expectedly poor low season, whilst mitigating week-on-week rate volatility,' FIS said, reported London's Air Cargo News. 'The August contract has seen the China & Hong Kong to Europe basket trade at $2.50/kg against the TAC Index as top 10 freight forwarders and commodity funds traded bilaterally.
'The trades represent enterprising moves by key market participants into the financial space, utilising the power and flexibility of financial contracts to manage profitability for physical air freight businesses.'
An AFFA is a cash-settled derivative contract with no physical delivery, used to hedge against adverse price positions.
FIS offers risk management advice to customers in dry bulk, tanker and air freight, steel, iron ore and fertiliser derivative markets, in addition to providing physical commodity and shipbroking services.
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