Ship financier HSH Nordbank anticipates rising box swap interest

GERMAN ship financier HSH Nordbank anticipates a growing interest in container swaps particularly among small importers keen to hedge exposure to fluctuations in freight rates, Reuters reports.

At a time of increasing rate volatility, particularly on the key trade route of Asia-Europe where rates tripled and then dropped to almost half, container swaps are of interest, said HSH's head of corporate sales Wolfgang Schulze-Collenburg, although pick-up is still in low figures of only 400 to 1,000 containers hedged with swaps.

 Freight derivatives (FFAs) settled against indices such as the Shanghai Shipping Exchange Index, allow buyers to manage price risk in container contracts as happens in rates for dry bulk or oil tanker rates. 

This type of risk management has been borne out of a market subject to tremendous volatility. The need for container derivatives are "driven internally", said container derivatives broker Cherry Wang.

 The number of financial institutions offering these products has risen to include futures broker Clarkson Securities, and banks like Credit Suisse and Morgan Stanley. "It is in its third year and people are still trying to grasp the concept," added Ms Wang.

 HSH will offer container swaps as an add-on to its lending service to shipowners so that debtors can hedge against revenue ups and downs. It will make for a "more predictable" market but will not save it, said Mr Schulze-Collenburg. 

For carriers, such as German's Hapag-Lloyd, the use of fixed annual rates or index-based rates offers security without the use of container swaps. 

The forecast for 2013 looks less fraught for the first half with carriers keen to push rate increases through to offset steep oil prices and overcapacity issues.