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.
Source : HKSG.
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