Container Swaps
5 August, 2010
9% [ 11 ] 19% [ 27 ]
East >> West
7% [ 9 ]
West >> East
27% [ 32 ]
West >> West
Rest of World
2000.00
1800.00
1600.00
INDEX POINTS
1400.00
1200.00
1000.00
800.00
600.00
05 Jan 07 05 May 07 05 Sep 07 05 Jan 08 05 May 08 05 Sep 08 05 Jan 09 05 May 09 05 Sep 09 05 Jan 10 05 May 10
European Service Mediterranean Service American Service (West Coast) American Service (East Coast)
2000.00
+ 149%
+ 152%
1800.00
USD / TEU
1600.00
1400.00
1200.00
Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10
• Container Swaps
– Are cash-settled wagers
– Agreed between two counterparties
– To ship a precise volume of containers
– On a particular trade route
– Over a specified period
– At a box-rate agreed today
200
other out.
1600.00 50000
48000
1500.00
46000
1400.00
44000
1300.00 42000
40000
1200.00
38000
1100.00
36000
1000.00 34000
Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10
Comprehensive
Composite SCFIIndex Ap Moller - Maersk (Share Price)
• 30 Volunteer principals
– Account for over 60% of trade volume on indexed routes
100%
80% 34%
49%
69%
60%
90% 97%
40%
20%
0%
2H 2007 1H 2008 2H 2008 1H 2009 2H 2009
OTC Cleared
4 4
Position
“ABC” supermarket knows it needs to ship 100 containers in FEB 2010 and is worried that box prices
from Shanghai >> Europe will rise in response to increased consumer demand
On DEC 10th 2009 ABC buys 100 CNW FEB swap contracts at the current spot price of $1,800 / TEU
• ABC posts an initial margin deposit of $18,000 (N.B. Total position value $180,000)
SCFI rates rise to $2,400 / TEU during FEB 2010 SCFI rates fall to $1,600 / TEU during FEB 2010
Physical Position / ABC pays $240,000 during In JAN ABC becomes concerned that market is
FEB to ship 100 TEUs [100 TEUs x $2,400] falling rather than rising as expected
Paper Position / ABC settles its 100 CNW FEB On Jan 15th, ABC sells 100 CNW FEB contracts
swaps on MAR 1st, receiving $60,000 at spot market price of $1,750 USD
[ 100 TEUs x ($2,400 – $1,800) ] ABC’s net swap position is closed out at a loss
Net Position / ABC successfully hedges their of $5,000. This is $35,000 less than holding on
costs. ABC pays $60,000 less for FEB transport to the contracts until settlement. ABC once
relative to spot-market trading competitors again exposes itself to physical box-rates alone.
Thank you for your time. Arthur Worsley [ + 44 (0) 7595 657 672 ]
We look forward to hearing from you soon. Container Freight Derivatives Broker