Sea freight futures seen growing to US$150b in 5 years
The global sea freight derivatives market could grow to around US$150 billion in the next three to five years, but issues over transparency and liquidity continue to frustrate expansion, market participants say.
Philippe van den Abeele, managing director of Castalia Fund Management, said he was confident the value per year of trade on the market could still grow to five times its current level, echoing estimates by some banks last year.
'It still has room to grow quite substantially - from the current US$20 billion in dry freight commodities and US$10 billion in oil or wet freight. The next or second phase of growth will come from financial institutions like banks and hedge funds,' he said on the fringes of a freight derivatives conference in London.
Alex Gray, chief executive of Clarkson Securities, would not be drawn on a growth figure but said the estimate was not unreasonable, although he cautioned that tanker derivatives growth was still lagging behind the dry commodities sector.
Mr Van den Abeele, formerly managing director of Clarkson Securities and a pioneer of the concept of Freight Forward Agreements (FFAs) in 1989, said oil trade was still in its infancy but growing strongly compared with expansion in dry commodities freight futures, which had tailed off. The launch of big clearing houses in the last couple of years and the attraction of hedge funds and big banks had helped spur that growth, he said.
Mr Van den Abeele said the withdrawal earlier this month of Dutch bank ABN Amro had not dramatically shaken confidence in the market. 'It's a mishap, an anomaly, it's all part of the normal growing cycle.'
ABN Amro said this month it had closed its oil, natural gas and freight derivatives trading operations but denied that the change followed trading losses.
Participants said a lack of transparency continued to be a major factor holding back the FFA market's development.
'Growth has been tremendous since 2001, but still we need additional liquidity and much more detailed reporting of volumes traded,' said Konstantinos Danikas, of UBS investment bank, who estimated traded volume across the sectors at some two million lots.
Despite the growing pains, senior figures in the sector remain optimistic, pointing to major growth in options trading and strong expansion in southern Europe and in Asia, where companies control some 50 per cent of the world's physical freight market.
Executive vice-president of Hong Kong's Noble Chartering, Raghu Raghunath, said there had been a dramatic increase in contracts traded in Asia since 2003. He estimated Asia accounted for some 30 per cent of traded FFA contracts, compared with 65 per cent in Europe and 5 per cent in the Americas.
Philippe van den Abeele, managing director of Castalia Fund Management, said he was confident the value per year of trade on the market could still grow to five times its current level, echoing estimates by some banks last year.
'It still has room to grow quite substantially - from the current US$20 billion in dry freight commodities and US$10 billion in oil or wet freight. The next or second phase of growth will come from financial institutions like banks and hedge funds,' he said on the fringes of a freight derivatives conference in London.
Alex Gray, chief executive of Clarkson Securities, would not be drawn on a growth figure but said the estimate was not unreasonable, although he cautioned that tanker derivatives growth was still lagging behind the dry commodities sector.
Mr Van den Abeele, formerly managing director of Clarkson Securities and a pioneer of the concept of Freight Forward Agreements (FFAs) in 1989, said oil trade was still in its infancy but growing strongly compared with expansion in dry commodities freight futures, which had tailed off. The launch of big clearing houses in the last couple of years and the attraction of hedge funds and big banks had helped spur that growth, he said.
Mr Van den Abeele said the withdrawal earlier this month of Dutch bank ABN Amro had not dramatically shaken confidence in the market. 'It's a mishap, an anomaly, it's all part of the normal growing cycle.'
ABN Amro said this month it had closed its oil, natural gas and freight derivatives trading operations but denied that the change followed trading losses.
Participants said a lack of transparency continued to be a major factor holding back the FFA market's development.
'Growth has been tremendous since 2001, but still we need additional liquidity and much more detailed reporting of volumes traded,' said Konstantinos Danikas, of UBS investment bank, who estimated traded volume across the sectors at some two million lots.
Despite the growing pains, senior figures in the sector remain optimistic, pointing to major growth in options trading and strong expansion in southern Europe and in Asia, where companies control some 50 per cent of the world's physical freight market.
Executive vice-president of Hong Kong's Noble Chartering, Raghu Raghunath, said there had been a dramatic increase in contracts traded in Asia since 2003. He estimated Asia accounted for some 30 per cent of traded FFA contracts, compared with 65 per cent in Europe and 5 per cent in the Americas.