Freight Derivatives

PFB are involved in over the counter (OTC) and cleared products in both crude and clean markets.  We believe that the freight derivatives market will see considerable growth in volume over the next few years and are committed to taking part in developing this market.  As a part of this commitment we have taken a shareholding in the freight futures exchange, Imarex, and have also introduced an introductory service whereby our direct clients may test the system on a limited and temporary basis via our membership in order to promote liquidity. 

Freight derivatives, both Imarex futures and FFA?s, are in essence Swap contracts settled against an index (usually BITRA or Platts).  At expiry the contract is settled in cash (cash for difference) with no actual physical voyage taking place.  

These contracts are increasingly becoming an integral part of the risk management tools available to tanker companies and/or traders with an exposure  to the industry:

Oil companies/Refiners/Charterers:

     - Lock in future freight cost

     - Rate protection while retaining flexibility of choise of vessels

     - T/C aletrnative (more liquidity/availability compared with physical

        timecharter)

Shipowners:

     - Lock forward revenues, stability of cashflow

     - Rate protection but still flexibility in physical market to take

       advantage of combinations

     - Cometitive alternative to the T/C market which is very illiquid

     - Trade other segments

Traders (finance institutions/investors):

     - Control cost of freight when trading oil (physical or implied

        when trading parer)

     - Trade the paper => pure exposure alternative to other products

        (buy/sell FFA instead of shares)

In general no restrictions to physical operations:

      o Free to choose ships, ports etc according to spot requirements

      o No weather or vessel delays and resulting freight volatility

      o No requirement to move physical cargo or vessel