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Biz News Korea(Eng)
S. Korean gov’t to push to establish futures exchange of freight charges in Busan
- Collected
- 2016.09.18
- Distributed
- 2016.09.19
- Source
- Go Direct
An official of the Ministry of Oceans and Fisheries said on Saturday that the ministry plans to issue advance legislation notice of the revision of the ocean freight charge law to establish futures exchange of freight charges in the port city of Busan within the second half of this year. Once the law passes the National Assembly early, Forward Freight Agreement (FFA) would take effect through futures exchange of freight charges next year at the earliest.
FFA is a financial forward contract that allows ship owners, charterers and speculators to hedge against the volatility of freight rates. It gives the contract owner the right to buy and sell the price of freight for future dates.
The government plans to establish the futures exchange because it believes that external factors such as oil prices and trade volume leading to freight rate volatility have driven Hanjin Shipping Co. and Hyundai Merchant Marine Co. to the brink of ruin.
The establishment of futures exchange of freight charges can hedge against the volatility of freight rates.
“Futures transactions of freight charges would eliminate uncertainties of management for both ship owners and charterers as future prices would be more predictable,” said an official of the shipping industry.
By Na Hyun-joon
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