Platts is proud to announce that its shipping division has entered the market as a provider of container freight assessments. These new daily $ per FEU indexes aim to provide the industry with an efficient pricing tool to aid in freight contract negotiation and hedging against bunker price volatility.
In this Methodology video, Platts president Martin Fraenkel and editorial director for global shipping and freight, Peter Norfolk, explain why Platts is entering the container space and the market needs that the new container freight assessments are addressing.
Platts invites everyone with exposure to container freight to register for Platts web container app at: containers.plattslabs.com.
Intro from Martin Fraenkel:
Hello everyone and welcome to the latest edition of S&P Global Platts Methodology video. We are proud to announce that Platts Shipping division has entered the market as a provider of Container freight assessments. These new daily $ per FEU indexes aim to provide the industry with an efficient pricing tool to aid in freight contract negotiation and hedging against bunker price volatility. So, today I've asked our Global Director for Shipping and Freight, Peter Norfolk to discuss these assessments and their intended role in the container market.
Hi Peter and thanks for being here today. Could you explain why Platts is entering the container space and what are the market needs that the new container freight assessments are addressing?
Peter: Thanks very much Martin. The global container industry is huge – in excess of $4 trillion worth of goods will be shipped using containers in 2018. Almost everything we use on a daily basis ends up in containers at some point. We've observed that there is a lack of transparency in all-inclusive container freight pricing, which can lead to a lack of trust in negotiations and shows the need for independent pricing. On top of that, container market participants have massive exposure to bunker prices, which is particularly apparent given recent rises in oil prices, as well as the upcoming International Maritime Organisation regulations which will lower its global marine fuels sulfur limit to 0.5% in 2020. Until earlier this year, many container market participants used bunker surcharge assessments published by the Transpacific Stabilisation Agreement, which was a useful formula to calculate bunker charges using Platts bunker prices. The TSA folded earlier this year so we have now launched bunker charge assessments which sit alongside our all-inclusive freight per box assessments. These bunker charge numbers show costs per container on a dollar per FEU basis.
Martin: Presumably there are many variables involved in calculating bunker surcharges on container routes. You have to consider bunker prices in various ports, speed and consumption of the vessel and so on. How do Platts assessments take these variables into account?
Peter: Firstly, we publish all-inclusive $/FEU freight assessments which are arrived at via our daily survey of market participants. Bunker charge assessments are published for key routes and take into account the variables that you mention. These are arrived at via consultation with the market, assuming the most representative trades on those routes. And our calculations are directly fed by Platts bunker prices, which will include upcoming 0.5% sulfur fuel assessments , once IMO 2020 is in force.
Martin: Platts primary mission is to ensure transparency and efficiency in commodity markets. How will these container assessments contribute to achieving that goal?
Peter: With these assessments there is no need for different, confusing bunker adjustment formulas that often drag down negotiations between carriers and their clients. Instead, industry players have an unparalleled flexibility to track their exposure to bunkers straight up in $/FEU and conclude their contracts against independent, transparent indexes. The flexibility is unparalleled as you can choose the index that you prefer. Whether it would be all-inclusive freight, bunker charges or bunker excluded assessments and since assessments are daily, players can choose any date ranges and averages as a base for their contracts. Weekly, monthly, quarterly or even customized ranges.
Martin: And I guess more good news is that industry players can have unlimited access to these assessments in order to test them?
Peter: That's right. These numbers are freely available online and on the mobile app, which also contains news and relevant market information. We'd like to invite market players, including carriers, retailers and other end users and logistics providers to try it out. As always with Platts, any feedback will be taken into account to make these assessments even better in the future.
Martin: Thanks for this Peter! And we invite everyone with exposure to container freight to register for Platts web container App, using the following link to test this new tool. Join us next time for more market updates: containers.plattslabs.com.