commodities
quinta-feira, novembro 27, 2003
ft 26nov03
on freight
Market Insight: Shipping freight rates rise
By Kevin Morrison
Published: November 26 2003 17:10 | Last Updated: November 26 2003 17:10
Shipping freight rates have risen sharply this year and are close to record highs due to China's rapacious demand for raw materials. Chinese demand has pushed up prices for many commodities to their highest point in years, tied up large numbers of tankers and triggered a surge in derivatives trading on shipping rates.
London's Baltic Dry Index - a basket of prices for charting vessels on 25 of the world's most important routes - has more than doubled this year in response to a sharp rise in demand for tankers.
About 6bn tonnes of raw materials - or more than 90 per cent of world trade - is carried by sea. Rising freight rates mean that, in some cases, the cost of shipping has overtaken the price of the commodity carried.
Brokers said the freight rates for shipping steaming coal from South Africa to the Netherlands are about $25 per tonne, compared with the 10-year average of $7.
Grain markets have also seen similar freight hikes, with the cost of shipping a tonne of grain increasing to about $45 a tonne - about triple its recent average. The cost of maize has remained at about $125 a tonne.
Philippe van den Abeele, managing director of Clarksons Securities, an arm of the shipbroker, said that since freight charges were a significant part of the price of the raw material, traders had become more active in hedging costs with derivatives. "We are seeing derivative volumes about three times the amount of coal physically carried on the Richards Bay route," he said.
He expects derivatives trading on tankers carrying dry bulk such as iron ore and coal to rise to more than $10bn this year from about $3bn last year.
"We have seen existing metals players like BHP Billiton and Glencore become more active, and on the grains side Cargill and Dreyfus have become more involved [in derivatives trading]."
He added that the higher volatility and turnover in the freight futures market had also attracted financial players such as Deutsche Bank, Morgan Stanley and Goldman Sachs.
Derivatives trading on shipping rates, also known as forward freight agreements, is conducted in the over the counter market (OTC) and benchmarked against prices listed on the Baltic Exchange.
Forward prices on many trading routes are expected to remain high because of Chinese demand and a lack of new dry bulk carriers being built. Forward prices on the Richards Bay route, for example, are above the 10-year average until 2007.
The rapid increase in freight costs has focused investors' attention on London's Baltic Exchange, where members account for most of the oil tanker market and up to 40 per cent of the dry bulk market. Peter Kerr-Dineen, chairman, said broker earnings were set to surge this year from £322m in 2002 on the back of increased volumes.
The majority of shipping freight derivatives are for dry bulk, with oil tankers representing a small but growing share of the overall market, in spite of the fact that the value of oil carried each year far exceeds the amount carried by dry bulk carriers.
Mr van den Abeele said oil tanker freight derivatives were estimated at $1bn in 2002 and could rise to $3bn this year.
Keith Amato, co-founder of ACM Shipping, who has set up a trading operation for oil freight derivatives, said so far there had been reluctance by shipping companies to hedge. "They are not used to risk management with derivatives, but we are starting to see some interest and once you have a few come on board, more will follow," he said.
quarta-feira, novembro 26, 2003
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America and Brazil both lost out in Miami
By Peter Hakim
Published: November 25 2003 21:36 | Last Updated: November 25 2003 21:36
The outcome of last week's meeting in Miami of 34 western hemisphere trade ministers gave free trade advocates little to cheer about. It is true the gathering, which was supposed to lay out the road map for completing the Free Trade Area of the Americas (FTAA) by December 2004, did not collapse in acrimony, like the World Trade Organisation's September meeting in Cancún. Agreement was reached in Miami, however, only because the assembled ministers decided not to grapple with any of the real issues at stake.
Worse yet, the ministers in Miami took a huge step backwards when they decided their goal was no longer a single trade arrangement uniting all 34 countries with a common set of rules and procedures. Instead, each FTAA nation would now have to accept only a minimal list of yet-to-be-established obligations, and would then be free to negotiate whatever arrangement it wishes with any other country or group of countries in the hemisphere. This scaled-down format is widely referred to as "FTAA-lite".
The US, the hemisphere's economic colossus, was the country best positioned to make the session more productive. But George W. Bush's administration, unwilling to offend any political constituencies, failed to offer a single concession on the issues that mattered most to Brazil and the rest of Latin America. It insisted that agricultural questions had to be resolved in the (now stalled) global WTO talks.
Brazil responded by demanding that issues of importance to the US - including rules affecting investments and intellectual property, and restrictions on trade in services and government purchases - also be struck from the FTAA agenda. Its delegates, well aware of the limited support for an FTAA in Brazil, were mostly interested in trimming the scope of negotiations. In this, they found common ground with the US, which was eager to avert an outright breakdown of negotiations.
Canada, Chile and Mexico, which already have free trade pacts with the US, objected to watering down the FTAA plans - but offered no substantive proposals to bridge the US-Brazil divide. Meanwhile, most other Latin American countries were lining up to negotiate bilateral deals with the US.
The final agreement in Miami largely reflected Brazil's wishes. Yet the Brazilians may turn out to be the big losers. If the US completes all the bilateral agreements it has pledged to pursue, Brazil and its Mercosur partners will be sitting on the sidelines (along with Venezuela, Cuba and Haiti), while other Latin American nations secure preferential access to the US. Even if Mercosur negotiated its own deal with Washington, it would still leave the US at the centre of all trade and investment flows in the hemisphere. This "hub and spoke" arrangement would give Brazil far less influence on regional economic matters than would a unified free trade arrangement.
But the US will end up losing as well. First, it will not get the access it wants to Brazil and the Mercosur markets. More important, an FTAA-lite will do little to advance the US agenda in inter-American relations. It will not establish a strong foundation for an economically integrated hemisphere. Nor will it serve as a substantial anchor for Latin America's market reforms or its democratic gains. A strong FTAA is the best opportunity ever for the US to join Latin America in a genuine, multilateral partnership. A weak agreement will reinforce traditional patterns of hemispheric relations, which have never been very productive for the US or Latin America.
Fortunately, there is still time for repairs. The best opportunity may come in January, when the heads of state of all 34 FTAA nations are due to assemble in Mexico for another summit. Although trade is not now on the agenda, it would be the right time for the hemisphere's leaders to get the FTAA negotiations back on track.
The heads of state should also extend the negotiations another year or two beyond the current December 2004 deadline. Realistically, time is too short to conclude a good agreement, and no one should expect Washington to concede anything during a presidential election year.
An experienced Mexican trade negotiator told me that the disagreements that now separate the US and Brazil are no greater than those that divided Mexico and the US at the time of the North American Free Trade Agreement negotiations. The difference was that the US and Mexico both wanted to reach agreement.
The writer is president of the Inter-American Dialogue
