Ship owners, oil giants and traders in Asia can use a new tool - forward freight agreements (FFAs) - as a mechanism to hedge physical contracts in the highly volatile oil tanker trade, a broker says.
SSY Futures director John Banaszkiewicz said the FFA provided the industry with an opportunity to take a degree of profit as well as prevent a greater loss.
'As FFAs become endorsed by the oil tanker industry, with a critical mass of participants being involved on a regular basis, there will be a natural progression to the use of a variety of futures products and options,' he said.
While there was 1.8 billion tonnes of shipping in the market, only 10 per cent of the industry was using derivatives as a hedging instrument.
The percentage was similar in Asia, he said. Between 30 and 50 companies were setting up a risk department to handle such tools and banks also were showing interest. Mr Banaszkiewicz said he would like to see more Handymax owners use them.
Most contracts were for between three to six months, but recently South African coal was looking at two-year contracts, he said.