The Baltic Exchange, through its market data subsidiary, Baltic Exchange Information  Services Ltd (BEISL), and Zhengzhou Commodity Exchange (ZCE) have agreed a memorandum of understanding (MOU) to explore cooperation in the research of shipping derivatives. BEISL and ZCE will work together on research and development of a futures contract settling against the Baltic Panamax Index (BPI) in China.

Established in 1990, ZCE is regulated by the China Securities Regulatory Commission (CSRC). ZCE has launched 23 futures products and 8 options products covering the fields of agriculture, energy, chemicals, textile, construction materials and metallurgical industries. In 2021 its cumulative trading volume was 2.6 billion contracts. According to Futures Industry Association (FIA) statistics, ZCE is the largest futures and derivatives exchange in China and the seventh largest globally.

The BPI is a composite index comprising five key international Panamax routes. Panamax vessels mainly transport coal, grain and other goods, and are a major force in dry bulk shipping.

Mark Jackson, Baltic Exchange CEO, said:

“Our globally recognised benchmarks, indices and shipbroking best practices are well respected by international markets.

“The Baltic Exchange is delighted to collaborate with ZCE as we look to develop our presence in China and support new market participants in trading derivatives which reference Baltic benchmarks.

“The BPI futures will provide a new freight risk management tool for Chinese shipping enterprises. Growth in the bulk freight derivatives markets has in turn long-term benefits for the entire maritime community.

“BEISL has regulated status under the UK Financial Conduct Authority and our benchmarks are audited, verifiable and completely independent.”

ZCE added:

“By weight, more than 90 percent of dry bulk cargo in international trade is transported by ship. Dry bulk shipping is international in nature, has an active diverse range of participants and frequent freight rate fluctuations. China is a country with large shipping capacity and trading volume. The scale of its dry bulk cargo shipping fleet and import volumes rank first in the world. Chinese shipping enterprises are deeply involved in the international market and are exposed to freight rate fluctuations. In recent years, ZCE has tracked and studied the dry bulk shipping market and relevant indices, and accelerated the expansion of services to this sector.”