International Dry Bulk Shipping Freight Rates Of Risk Aversion

Shipping is not only the most important international trade but also the most inexpensive mode of transport, more than 90%of the world's international trade volume transports by shipping as same as china.With China's rapid economic development, import and export volume uprise all the time, making China's shipping industry has maintained rapid growth momentum, specially total dry bulk shipping and dry bulk shipping of the world's average annual total rates of china keep increasing by 18%and 6%.China has become top of the world's largest volume now.However, shipping is vulnerable to many factors, including sea cargo, the cyclical nature of the goods, while the international political, environmental, economic, geographic, national economic development level and industrial structure characteristics and other factors, led to fluctuations in dry bulk shipping freight.we can see the fluctuations of dry bulk shipping freight by Baltic Dry bulk shipping freight index (BDI) From 1999 to 2002, placid, then the year of 2003,2004, keep rising up,until 10210 points between 2007-2008, increasing by unbelievable 152%, but following by another unexpected waytumble to a record's lowest 663 points on 5 Dec,2008, decreasing by 93.5%.Cargo owners or shipping companies have several ways to avoid risk retention, some choose to do nothing, which means they do not use any measure, whether freight up or down, bearing responsibility by themselves.; there are some cargo owners or shipping companies may choose the insurance; The rest of them will choose shipping financial derivatives. As we know, BIFFEX has exited the shipping financial derivatives market, and Forward Freight Agreements (FFA) takes its place,become the most famous shipping financial derivatives. Cargo owners or shipping companies avoid freight fluctuations risk by buying it when forecasting the freight will go up,selling when go down.But China's shipping companies suffered huge loss in recent years in the FFA market, it should be a risk aversion tool but now it become a burden which erode corporate profits, so it is important that we know how to make good use of FFA.