In an effort to help traders and users familiarise themselves with the new Panamax P8 route, Freight Investor Services has put together some brief FAQs.
Here’s an excerpt from it.
Why is FIS offering the Baltic P8 Route?
We have always believed that new routes provide a great opportunity for additional liquidity in the FFA market. The P8 route represents a hedging and trading opportunity on a new route that has shown strong growth and positive fundamentals.
FIS Shanghai office is receiving growing demand an inquiry from the Chinese crushing industry for a more effective hedging instrument.
What is the Baltic P8 route?
P8 is a Panamax vessel freight route from Santos, Brazil to Qingdao, China, primarily used to carry soybeans for processing in China.
What is the Baltic description for a vessel on this index?
Santos to Qingdao (min 13m arr draft). 66,000mt HSS, 10% more or less in owner’s option, free in and out, trimmed. 8,000mt Saturdays, Sundays + holidays excluded loading, 8,000mt Saturdays, Sundays + holidays excluded discharge. 24 hrs turn time at loading port, 24 hrs turn time at the discharge port. Loading 15/25 days from index date. Age max 15 years. 5% total commission.
What contracts are available to trade on paper?
FIS will focus on providing forward pricing on the front six months and front three quarters. NFX will clear the front 24 months for the P8 contract. We envisage a full contract to be 60kt, half contract 30kt, quarter contract 15kt with 5kt also workable.
Which exchanges will list the P8 contract?
Initially, P8 will only be listed for clearing by NFX. FIS clients wishing to trade the new P8 route from March 28 should contact their General Clearing Member to ensure they list the route.
Is there any historical pricing data?
FIS has been producing a forward curve for P8 on a trial basis for over six months and is happy to make this data available to customers.
What are the notional value of a P8 contract and the fuel oil exposure?
Taking the 66,000mt Panamax vessel at spot rates, the notional value is a little over $2 million with fuel oil being approximately 35-40% of the cost.
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Source: FIS
