Global Commodities Newsletter | Dec 2021
Greetings from Leipzig,
2021 has been “quite a year” to put it mildly. Indeed, if ever there was a year that demonstrated that Seaborne trade in bulk commodities remain the backbone of globalization, it was 2021. We need only look back to earlier this year, where the worlds’ eyes were on the Suez Canal when the Ever Given, got stuck in the famous waterway – resulting in massive supply chain delays which reverberates around the world to this day.
For EEX’ Dry Freight Business, as you will see in this newsletter, it was also “quite a year”. On the commercial side, we made two key changes to the team. Firstly, with Claudia Gerotto assuming the “Head of Sales - Global Commodities” role in the summer and more recently with Erlend Engelstad becoming “Head of Commercial” in Asia. I’m incredibly excited for both Claudia and Erlend. I’m convinced we have the right people in place to take our commercial business to the next level and I wish them much success in their new roles.
2021 was also the year of “Sustainable Shipping” and in July, we launched the Zero Carbon Freight Index (ZCFI) which enables players to see, for the first time, how the cost of carbon emissions could affect freight prices in real terms. By referencing the ZCFI, market participants now have a new information point, which they can use to calculate the cost of their carbon exposure, thereby giving a clearer, more indicative picture of their overall transportation cost. I have to say, we were “blown away” by the positive reaction to the ZCFI and I personally would like to thank our Head of Business Development, Richard Heath and his team for creating the index which hopefully brings a degree of certainty to the debate.
Of course, it is thanks to you, that we are able to continue to play an active role in the Dry Freight market. It is thanks to every customer and every broker and the support that you give us, day in and day out, that allows us to continue our journey in this fascinating market. Due to the pandemic, the last two years have been difficult for many of us and who knows when we will return to normality, or even what “normality” will look like. It is in these difficult times when support means everything. So, on behalf of myself and every member of the team, a very big “Thank You” to you all.
Wishing you a safe, restful and peaceful holiday season and “fingers crossed” that 2022 gives us the opportunity to meet in person once more.
Until next time,
Max Mustermann
Steffen Köhler
Freight Margining Update
Our clearing house, European Commodity Clearing (ECC) have introduced weighting factors for freight contracts in delivery in the calculation of Single Margin Parameters (SMPs) which are used to determine the SPAN® Initial Margin for derivatives.
From this week onwards, the single margin parameter to determine the SPAN® Initial Margin will be adjusted for all freight contracts in delivery by an additional weighting factor to cover the intra-month risk profile with the weights being updated on a monthly basis. The objective of the factor is to recognise that these contracts are already partially settled throughout the month in delivery. The factor successively reduces the single margin parameter throughout the month in delivery – in line with decreasing exposure to market risk.
A general description on the methodology to calculate the weighting factors can be found below.
Sustainable Shipping @ IDX
FIA’s International Derivatives Expo (IDX), recently returned to London for the first time in two years. Bringing together industry leaders, vendors and policy makers, the two-day conference examined the key themes influencing the global derivatives space today.
Speaking on the panel; “Exchanges and the roll out of new sustainability products”, Richard Heath (Head of Business Development – Global Commodities) discussed the key drivers in EEX’ sustainability roadmap including the launch of the EEX Zero Carbon Freight Index (ZCFI) and how it has helped the shipping industry in its transition towards a more sustainable future.
To view the discussion, click on the link below:
Webinar: Accessing the EU ETS from Asia
Thank you to everyone who joined our webinar – “EEX Emissions Markets – Accessing the EU ETS from Asia” last month.
During the webinar, EEX’ Head of Commercial (Asia) Erlend Engelstad and James Ash (Head of Environmental Markets - SSY Futures) gave a comprehensive overview of the world’s largest compliance market for emissions allowances – the European Emissions Trading Scheme (EU ETS). In addition, the guys also outlined the most recently introduced EU legislation and the consequences for companies around the world.
If you didn’t get a chance to catch the webinar on the day or would like to share with your colleagues, please find the “Watch Again” YouTube link below.
> Watch again
The Rising Role of Funds in Freight
In our latest episode of Talking OTC Commodities, Michael, Richard and Claudia chat with Kerry Deal (Freight Investor Services) on the rising importance of Funds in the Dry Freight Market.
In the podcast, the panel discuss the history of funds in freight, outline why now is the right time for funds to enter dry freight and examine what brokers and exchanges can do to attract more funds to the market.
Also, we just got news that Talking OTC Commodities has hit 5000 subscribers! Thanks a million to everyone who has subscribed so far and of course to all our guest speakers too!
> To listen, click here
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