Feasibility Analysis Of New Shanghai Containerized Freight Index Futures

In order to provide the hedging and investing instrument for thecontainer transportation market, Shanghai Shipping Exchange publishesthe new Shanghai Containerized Freight Index and develops Shanghaicontainerized freight futures. But the Shanghai containerized freightfutures has been disputed as we don’t know whether the Shanghaicontainerized freight futures is good enough.This paper tries to analyze Shanghai containerized freight futures bycomparing with dry bulk market in a new vision. First, the basic functionof futures trading market and the details of SCFI are introduced to definethe researching object. Second, characteristics and reason of freght ratefluctuation are pointed out, together with the effect from the surcharges toSCFI. Finally, from the view of market participants, we analyze theiractual attitude towards the Shanghai Containerized Freight Futures.Conclusions can be made that, among the three participants, the shippingcompanies are against the container freight forward transaction as theyare fear of losing pricing power and the monopoly position. Shippers whoown a large amount of goods can get long term agreements with the shipping companies, which can avoid the risk of fluctuations in freightrates. Other shippers are also not interested in the Shanghai containerizedfreight futures as for the small amount of container volume, the high riskand cost, and the low ratio for exporting goods with CIF trade clause. Thefinancial institutions also get little interested in the Shanghaicontainerized freight futures considering the small market capacity andthe high operational risk. If we want to promote the development ofShanghai containerized freight futures market, the financial institutionsshould be allowed and encouraged to the market because the shippingcompanies and shippers have little interest in it.To some extent, the analysis of Shanghai Containerized FreightFutures is helpful for its reform and development.