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Tanker and dry freight derivative volumes up in 2020 on market volatility

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Trading volumes in the freight derivatives markets for both tankers and dry cargo vessels saw an increase in 2020, according to data by the Baltic Exchange.

The Forward Freight Agreement (FFA) volumes for tankers were up 31% on the previous year, reaching 603,261 lots, with a daily record of 33,677 lots achieved on 16 March at a time when time-charter equivalent earnings for VLCCs exceeded $275,000.  

Volumes for dry FFA touched 1,548,127 lots, up 17% on 2019. Options trading in the dry market hit an all-time high, up 37% on the previous year to 318,183, Baltic Exchange data showed.

One lot is defined as a day’s hire of a vessel or 1,000 metric tonnes of transportation of cargo.

“2020 was another impressive year for the freight derivatives market. Underpinning these volumes are volatility, trust in the Baltic Exchange’s settlement data and increased participation by owners, charterers and traders,” commented Mark Jackson, chief executive of Baltic Exchange.

“Last year both the dry bulk and tanker markets experienced big swings amid the IMO 2020 fuel change, collapse in oil price and Covid-19 pandemic. The previous 12 months saw 1.5 million dry FFAs traded, representing growth of around 70% since 2012,” he added.

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