The explanation of "FFA" in the English-Chinese dictionary (source: Baidu Dictionary): FFAabbr.1. =Foreign Freight Agent foreign freight agent 2. =Future Farmers of America American Future Farm Association ffaabbr.1. =free from alongside shore delivery

Cargo price, delivery price 2. =for further assignment FFA is the abbreviation of English Forward Freight Agreement. It is a 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 of the Baltic Sea Exchange and the price agreed in the contract at a certain point in the future.

Essentially, it is a freight risk management tool.

This type of risk avoidance in futures options is called hedging.

Hedging is the driving force behind the futures market. Whether it is the agricultural product futures market, or the metal or energy futures market, it arises from the spontaneous formation of forward buying and selling when faced with risks caused by violent fluctuations in spot prices during the production and operation process.

Contract transaction behavior.

Freight hedging treats freight as a commodity, and shipowners or cargo owners buy insurance for the operation through the FFA market to ensure the sustainable development of stable operations.

Similarly, like all futures and options products, FFA is an arbitrage tool, and this is what financial institutions value.

At present, the participants in the FFA market mainly include the following four types of companies: 1. Shipping companies: shipping companies and operators engaged in international bulk cargo transportation.

For example, Norway's KLAVENESS, Denmark's NORDEN, Germany's OLDENDORFF, France's CETRAGPA, Italy's DEIULEMAR, Greece's NAVIOS/OCEANBULK, Singapore's PCL/IMC, South Korea's KOREANLINE/STXPANOCEAN, etc.; 2. Traders: engaged in ore, coal,

A trading enterprise that imports and exports bulk cargoes such as grain.

For example, the four "kings" of the world's food and agricultural products industry are Louis Dreyfus, Cargill, Bunge, ADM, etc.

They are skilled in commodity futures exchanges such as CBOT and have naturally become pioneers in the sea freight futures derivatives market; 3. Manufacturers: manufacturers engaged in the consumption of bulk raw materials such as ore smelting, grain processing, electricity, and oil refining.

For example, the world's mining giants BHPBILLITON and RIOTINTO, Europe's largest energy company RWE, the UK's KOCHCARBON, and the largest energy dealer in the United States, Enron, which collapsed in 2001, etc.; 4. Financial companies: various investment banks, hedge funds, futures companies, etc.

For example, Goldman Sachs, Morgan Stanley, Société Générale, Macquarie Bank of Australia, Merrill Lynch, etc.

Hope that China will become an important force. FFA trading originated in the late 1980s. In the past 15 years, 80% of transactions have been conducted between European shipowners and commodity traders, and the liquidity of transactions is not very high.

Since 2002, with the unprecedented surge in the shipping market in a century (see chart), market volatility has fluctuated violently, and the needs of market participants for hedging and arbitrage have driven the rapid development of the FFA market.

The year 2006 was a watershed, both in terms of transaction volume and participation, reaching an unprecedented level.

According to statistics released by FFABA on December 20, 2006, a total of 511,105 bulk and tanker FFA contracts were traded in the third quarter of 2006. According to conservative estimates, the annual transaction volume will be no less than 1.5 million lots and the transaction amount will exceed 10,000.

One hundred million U.S. dollars.

The chairman of the Baltic Exchange once said that "freight has truly become a tradable commodity."

The biggest winner in the FFA market in 2006 was TMT Company in Taiwan, China. Due to its paranoid bullishness, it brought him more than 1 billion US dollars in profits, and the company's CEO Nobu has also become a legend in the industry.

As a "zero-sum game" casino, there are naturally losers.

Greek shipowner DRYSHIPS, German shipowner OLDENDORFF, South Korea's STXPANOCEAN, etc. each reported huge losses in the FFA market. Canadian ship operator North American Shipping Lines (NASL) declared bankruptcy due to a loss of US$30 million in FFA.

The impact of FFA on the spot market is also increasing.

Last year, in order to support its position in FFA, TMT "basked" the 10 Capesize ships it controlled, causing tight shipping capacity and thus pushing up the spot index.

The increase in freight costs indirectly fueled the surge in commodity prices last year.

The importance of FFA, as well as its risk management and speculative arbitrage functions, are also attracting more and more Chinese players.

According to incomplete statistics, a total of 17 Chinese companies have started FFA transactions, mainly shipping companies and traders.