Baltic Exchange an iconic name in shipping

A man walks past the Baltic Exchange in London, UK, on June 16, 2010.
A man walks past the Baltic Exchange in London, UK, on June 16, 2010. PHOTO: BLOOMBERG

The Baltic Exchange is one of London's most revered trading powerhouses and an iconic name in global shipping. Founded in 1744, it is the world's source of maritime market information for trading and settlement of physical and derivative shipping contracts.

It consists of shipbrokers, ship owners and Baltic freight charterers, who supply daily information and data in the maritime market.

Headquartered in London, with regional offices in Singapore, Shanghai and Athens, it is owned by its shareholders, most of whom are members. The exchange is governed by a board of directors elected by shareholders and members. Its more than 650 members have included financial experts, lawyers, representatives of the insurance industry and those from the shipping business.

 

The exchange's history harks back to the Virginia and Baltick Coffee House in Threadneedle Street in 1744, frequented by merchants and ship captains who negotiated cargo shipments there.

Despite its name, the Baltic Exchange is no longer the forum for trade in the chartering of vessels. It produces daily benchmark rates and indices used to trade and settle freight contracts as well as data used in the freight derivatives or Forward Freight Agreements (FFA) market, which allow investors to take positions on freight rates in the future.

The exchange serves as a platform for the trading of futures. In 2011, via a wholly owned subsidiary, it launched the first central FFA platform, called the Baltex.

The exchange publishes six daily indices, including the Baltic Dry Index, a measure of how much it costs to transport "dry" commodities around the world - raw materials like grain and steel. The index fell below 500 for the first time in recorded history in November, and has kept falling since. It was as high as 1,222 in August last year, and it has fallen 84 per cent from a recent peak of 2,330 in late 2013.

It is frequently used as a canary in a coal mine for the state of the global economy and international trade. If the price is low, it suggests trade is slowing.

In the year ended March 31, 2015, the exchange reported a net profit of £1.34 million on a revenue of £6 million, and the market value of its investments was £19.9 million.

Grace Leong

A version of this article appeared in the print edition of The Straits Times on February 27, 2016, with the headline 'Baltic Exchange an iconic name in shipping'. Print Edition | Subscribe