FFA FFA is the abbreviation of English ForwardFreightAgreement. This is the forward freight agreement reached between the buyer and the seller. The agreement stipulates the specific route, price, quantity, etc. , and both parties agree to collect or pay the freight difference between the official freight index price and the contract price at some time in the future. In essence, it is a freight risk management tool. This method of avoiding the risk of futures options is called hedging. Hedging is the driving force of the futures market. Both agricultural products futures market and metal and energy futures market are derived from the spontaneous trading behavior of buying and selling forward contracts when the spot price fluctuates greatly in the production and operation process. Freight hedging means that freight is regarded as a commodity, and shipowners or shippers buy insurance for the operation link through FFA market to ensure its stable operation and sustainable development. Similarly, like all futures option products, FFA is an arbitrage tool, which is exactly what those financial institutions like.

At present, the participants in FFA market mainly include the following four types of companies:

1. Shipping companies and operators engaged in international bulk cargo transportation. For example, KLAVENESS in Norway, NORDEN in Denmark, OLDENDORFF in Germany, CETRAGPA in France, DEIULEMAR in Italy, NAVIOS/OCEANBULK in Greece, PCL/IMC in Singapore, KOREANLINE/STXPANOCEAN in South Korea, etc.

2. Traders: trading enterprises engaged in the import and export of bulk commodities such as ore, coal and grain. For example, the world's four "kings" of grain and agricultural products industry, Louis Dreyfus, Cargill, Bunky, ADM and so on. They are good at dancing in commodity futures exchanges such as CBOT, and naturally become pioneers in the derivatives market of sea freight futures;

3. Producers: production enterprises engaged in the consumption of bulk raw materials such as ore smelting, grain processing, electricity and oil refining. For example, BHP Billiton and RIOTINTO, the world's mining giants, RWE, the largest energy company in Europe, KOCHCARBON in Britain, and Enron, the largest energy company in the United States, went bankrupt at 200 1;

4. Financial companies: various investment banks, hedge funds, futures companies, etc. For example, Goldman Sachs, Morgan Stanley, Societe Generale, Macquarie Bank of Australia, Merrill Lynch, etc.

I hope China will become an important force.

FFA transaction originated in the late 1980s. In the past 15 years, 80% of the transactions were conducted between European shipowners and commodity traders, and the liquidity of the transactions was not very high. Since 2002, with the once-in-a-century surge of shipping market (see chart), the market has fluctuated violently, and the demand of market participants for hedging and arbitrage has promoted the rapid development of FFA market.

And 2006 is a watershed, both in terms of volume and participation, it has reached an unprecedented level. According to the statistics released by FFABA on February 20th, 2006, in the third quarter of 2006, FFA contracts for bulk cargo and oil tankers totaled 565,438+065,438+065,438+005 lots. According to this conservative estimate, the annual turnover was not less than 6.5438+0.5 million lots, and the transaction amount exceeded 1 trillion dollars. The chairman of the Baltic Exchange once said that "freight has really become a tradable commodity". In 2006, the biggest winner in FFA market was TMT Company in Taiwan Province Province, China. Because of its paranoid attitude, it brought him more than $654.38 billion in profits, and its CEO Nobu became a legend in the industry. As a "zero-sum game", casinos naturally have losers. Greek shipowner DRYSHIPS, German shipowner OLDENDORFF and Korean shipowner STXPANOCEAN reported huge losses in FFA market respectively. Canadian shipping operator NASL declared bankruptcy because it lost $30 million in FFA.

FFA has an increasing influence on the spot market. Last year, in order to support its position in FFA, TMT "sunned" its own 10 Cape of Good Hope ship, resulting in insufficient capacity and pushing up the spot index. The increase in freight indirectly led to the soaring commodity prices last year. The importance of FFA, as well as its risk management and speculative arbitrage functions, has also attracted more and more China players. According to incomplete statistics, there are currently 17 companies in China, mainly some shipping companies and traders. On June 5438+February 65438+February 9, 2006, the first "FFA Seminar for Greater China" led by Jiaxin Company, a well-known domestic iron ore trader, was held in the floating hall of Beijing Grand Hyatt Hotel. 15 companies from China got together to discuss hot topics such as credit risk management and market risk management. The FFA Association of China was established at the meeting, and it was decided to hold a meeting every six months. The next meeting will be presided over by Hongkong Changyun Dongfu. I believe that in the near future, China will become an important force in the FFA market.

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