S&P Dow Jones Indices (S&P DJI) has launched a new series of indices to provide transparent, reliable and publicly available performance benchmarks for the dry bulk freight markets.
The S&P GSCI Freight Indices utilize the Baltic Exchange’s monthly and quarterly forward freight agreements (FFAs) prices. FFAs are cash-settled futures contracts and the main derivative instruments for the physical shipping markets. The indices are the market’s first transparent indices based on the FFAs.
The new index series, which also makes use of data from shipping analytics firm TonnEdge, includes the S&P GSCI Freight Capesize (monthly), S&P GSCI Freight Capesize (quarterly), S&P GSCI Freight Panamax (monthly), and S&P GSCI Freight Panamax (quarterly).
Dry bulk, referring to raw materials that are shipped in bulk such as iron ore, coal and grains, is the largest sector in the shipping industry and is dominated by two vessel types. Capesize and Panamax are the largest and second largest standard sizes of dry bulk carriers.
The dry bulk FFA market is highly liquid. Dry bulk FFA volumes hit 2,524,271 lots in 2021, up 61% on 2020, according to the Baltic Exchange. The FFA volumes based on both Capesize and Panamax vessels accounted for approximately 90% of the underlying physical dry bulk market flows.
“As global investors increasingly seek to diversify their investments and look for alternative vehicles to tap into niche market segments, this index series can be a meaningful gauge for the final value of this commodity,” says Fiona Boal, head of commodities and real assets at S&P DJI.