The Heartland Shippers Conference is presented by Cargo Business News and the Midwest Global Trade Association, and supported by several other U.S. Midwest trade/shipper organizations.
The U.S. Midwest is home to major manufacturing, agriculture, and a significant consumer market of over 66 million. Conversely, getting cargo in and out of the nation's heartland is challenging for a variety of reasons, and the Heartland Shippers' Conference will address these themes among others pertinent to the global supply chain's vital connection to the region and its developing infrastructure.
Says Richard Heath, Head of Products at the Cleartrade: "The panel on freight rate risk management was well received. As many of the organisations present conduct their core business in the agricultural space they are used to using derivatives to manage underlying price risk. Due to this there was a general understanding and appreciation of how effective these tools could be if correctly applied to the container freight market."
OTC Derivatives: Evaluating the Impact of New Regulation in Europe, Thomas He...DerivSource
Thomas Heinatz, Senior Manager, PwC
Presentation at the DerivSource/Omgeo briefing 'OTC Derivatives: Evaluating the Impact of New Regulation in Europe' held in Frankfurt on November 13th 2013.
The new stringent MiFID II regulatory technical standards (RTS) is top of mind for Banks, venues, and participants. One of the areas of major concern and confusion are the new regulatory technical standards (RTS) for trade transaction record management and reporting for trades made to venues that support high speed trading i.e., almost all electronic trades. The new MiFID II RTS standards require all parties involved in a trade to capture, record, maintain and report all information related to the transaction life-cycle with precise time-stamps accurately synchronised to the world time standard - UTC (Coordinated Universal Time). Existing systems cannot do this.
The reason the regulator wants to do this is to be able to retrospectively recreate the sequence of market actions that led to a particular market condition (possibly abusive behaviour) and forensically verify who did what, how markets reacted, and who is to blame.
It is very difficult to meet these new MiFID II regulatory technical standards (RTS) and may cost many millions of dollars to replace or retrofit the existing trading systems with this new capability. In addition, they will incur the ongoing costs of remaining compliant amid changes in their technology and amid future regulatory requirements. The banks and venues are concerned that even if they spend this money, their implementations may not meet the requirements and intention of (MiFID II) the new regulations, and failure to be compliant may result in significant fines.
Corvil is introducing a novel new solution that addresses this problem - it is able to meet these new MIFID II requirements for UTC-synchronised trade transaction record management without requiring a retrofit or re-architecture of trading platform components.
OTC Derivatives: Evaluating the Impact of New Regulation in Europe, Thomas He...DerivSource
Thomas Heinatz, Senior Manager, PwC
Presentation at the DerivSource/Omgeo briefing 'OTC Derivatives: Evaluating the Impact of New Regulation in Europe' held in Frankfurt on November 13th 2013.
The new stringent MiFID II regulatory technical standards (RTS) is top of mind for Banks, venues, and participants. One of the areas of major concern and confusion are the new regulatory technical standards (RTS) for trade transaction record management and reporting for trades made to venues that support high speed trading i.e., almost all electronic trades. The new MiFID II RTS standards require all parties involved in a trade to capture, record, maintain and report all information related to the transaction life-cycle with precise time-stamps accurately synchronised to the world time standard - UTC (Coordinated Universal Time). Existing systems cannot do this.
The reason the regulator wants to do this is to be able to retrospectively recreate the sequence of market actions that led to a particular market condition (possibly abusive behaviour) and forensically verify who did what, how markets reacted, and who is to blame.
It is very difficult to meet these new MiFID II regulatory technical standards (RTS) and may cost many millions of dollars to replace or retrofit the existing trading systems with this new capability. In addition, they will incur the ongoing costs of remaining compliant amid changes in their technology and amid future regulatory requirements. The banks and venues are concerned that even if they spend this money, their implementations may not meet the requirements and intention of (MiFID II) the new regulations, and failure to be compliant may result in significant fines.
Corvil is introducing a novel new solution that addresses this problem - it is able to meet these new MIFID II requirements for UTC-synchronised trade transaction record management without requiring a retrofit or re-architecture of trading platform components.
We are witnessing one of the most challenging transportation environments in history due to regulatory, demographic and macro-economic forces. Join Internet Truckstop CEO Scott Moscip as he examines various methods to utilize technology to overcome capacity constraints.
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Building Your Employer Brand with Social MediaLuanWise
Presented at The Global HR Summit, 6th June 2024
In this keynote, Luan Wise will provide invaluable insights to elevate your employer brand on social media platforms including LinkedIn, Facebook, Instagram, X (formerly Twitter) and TikTok. You'll learn how compelling content can authentically showcase your company culture, values, and employee experiences to support your talent acquisition and retention objectives. Additionally, you'll understand the power of employee advocacy to amplify reach and engagement – helping to position your organization as an employer of choice in today's competitive talent landscape.
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https://www.productmanagementtoday.com/frs/26903918/understanding-user-needs-and-satisfying-them
We know we want to create products which our customers find to be valuable. Whether we label it as customer-centric or product-led depends on how long we've been doing product management. There are three challenges we face when doing this. The obvious challenge is figuring out what our users need; the non-obvious challenges are in creating a shared understanding of those needs and in sensing if what we're doing is meeting those needs.
In this webinar, we won't focus on the research methods for discovering user-needs. We will focus on synthesis of the needs we discover, communication and alignment tools, and how we operationalize addressing those needs.
Industry expert Scott Sehlhorst will:
• Introduce a taxonomy for user goals with real world examples
• Present the Onion Diagram, a tool for contextualizing task-level goals
• Illustrate how customer journey maps capture activity-level and task-level goals
• Demonstrate the best approach to selection and prioritization of user-goals to address
• Highlight the crucial benchmarks, observable changes, in ensuring fulfillment of customer needs
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2. • The World Container Index
• Freight Rate Volatility
– Trends observed by the WCI
– Freight Rate Risk
• Freight Rate Risk Management
– Risk Management Options
– Derivatives - The Basics
• Index Linked Container Contracts
– Types & Uses
– Industry Adoption
• Indices, Index Linked Contracts and Risk Management –
Implications & Conclusions
Agenda
Heartland Shippers Conference – April 2013
3. Heartland Shippers Conference – April 2013
The World Container Index (WCI)
The World Container Index is a joint venture between:
Drewry Maritime Advisors and Cleartrade Exchange
• Weekly freight rate levels on 11 major
port to port routes – Trans-Pacific, Asia-
Europe & Trans-Atlantic
• Weighted average Composite Index
• Highly granular data providing an average,
lowest and highest rates
• Sourced from an international panel of
NVO / NVOCC’s providing over 300 prices
each week
The index is designed for:
• Benchmarking freight rates and trends
• Index Linked Contracting
• Settlement of freight derivatives
4. Heartland Shippers Conference – April 2013
Trends Observed by the WCI
2500
2700
2900
3100
3300
3500
3700
3900
4100
4300
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
USECUSD/FEU
USWCUSD/FEU
Trans-Pac Head Haul
China - USWC China - USEC
Container freight rate volatility has
increased for three primary
reasons:
– Macroeconomic & geopolitical
uncertainty
– Step change in vessel size
– Carrier market behaviour
Freight rate volatility is not a short
term phenomenon:
– Defining feature of the decade
– Industry adaption critical
– Impact on shipper-carrier relations 750
800
850
900
950
1000
1050
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
USD/FEU
Trans-Pac Back Haul
USWC - China
5. Heartland Shippers Conference – April 2013
Freight Rate Risk
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
USD/Tonne
Trans-Pac Back Haul Quarterly
Volatility
Decrease Increase
Unpredictability of freight rates constitutes real risk:
– Rate volatility and short
validity contracts make
forward pricing impossible
– Offering derived forward
prices exposes the exporter to
large risks
– Although backhaul rates look
to be more stable margins are
smaller
6. Heartland Shippers Conference – April 2013
Freight Rate Risk Management
Risk Management Options
1. Removal of Risk / No Risk Management –
Buy Spot
2. Pass Risk Downstream – Pass to client
3. Fixed Rate Long Term Contract – Suited to
BCO/Intra-Firm trade
4. Flexible Index Linked Contract
5. Freight Derivatives
7. Heartland Shippers Conference – April 2013
Freight Derivatives – The Basics
The “Physical” and “Paper” Markets
• Physical Market
– Agreement to move XX TEU at XX USD/TEU between POL and POD
– Between, carrier and shipper, carrier and NVO, NVO and shipper etc.
– Physically settled, e.g. boxes shipped
• Paper Market
– Agreement for XX TEU at XX USD/TEU on route XX in XX month/quarter/year
– Between, party A and party B
– Cash settled, e.g. party A pays party B or v.v.
8. Heartland Shippers Conference – April 2013
Freight Derivatives – How do they Work?
• Freight derivatives are used to manage risk by securing a fixed rate
• A fixed rate is achieved by creating a position in the paper market which is equal
and opposite to a position in the physical market
Shipper Example
• Physical Market Position = pay more if freight rates go up (Short Position)
• Paper Market Position = get paid if freight rates go up (Long Position)
• Physical Position + Paper Position = Fixed Freight Rate
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
FreightRateUSD/Tonne
Paper P&L
Loss Profit
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
FreightRateUSD/Tonne
Physical P&L
Profit Loss
9. Heartland Shippers Conference – April 2013
Index Linked Container Contracts (ILCC’s)
ILCC’s are used to create flexible long term agreements which
move with the market reducing the drivers for contract default
• Ensure contract rates move relative to the
market
• Removes drivers for contract default
• Eases shipper – carrier tensions
• A “BAF” clause for your freight
10. Heartland Shippers Conference – April 2013
ILCC Types – Time Lag vs. Real Time
1000
1500
2000
2500
3000
3500
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
USD/FEU
Time Lag ILCC
Spot Contract
1000
1500
2000
2500
3000
3500
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
Jul
Oct
Jan
Apr
USD/FEU
Real Time ILCC
Spot Contract
• Time lag contracts measure a change
in the market over time
• This change is then applied to the
agreed contract rate
• The example uses the average change
in the index over 1 quarter
• Time lag contracts decrease disparity
between market and contract rates
• Real time contracts are synchronised
with the market
• The difference between the contract
and the index is a fixed differential
• Differential is either numeric or ad
valorem
• E.g. Index – 200 USD/FEU or Index x
0.7
11. Heartland Shippers Conference – April 2013
Industry Adoption of Index Linked Contracts
Early Adoption
• To date mostly used on Asia export
trades to North America and North
Europe
• Trans-Pacific was first to see ILCC’s
after 2009-10 contracting season
Number of ILCC’s in 2012-13
• North America Trades – 61 (FMC)
• North Europe/Other Trades – 100 +
(Drewry estimate)
Early adopters
• BCO’s (Retail/FMCG)
• European Lines
• NVO/NOVCC’s/Freight Forwarders
Approach & Tactics
• Experiments focused on small number
of key lanes
• Agreed within existing strong
relationships
• Mutual trust essential
Common Contract Methodologies
• Time lag
• In frequent changes (replace tender)
• 1 – 3 year duration
Barriers to Uptake
• Knowledge and expertise
• Step change in contracting behaviour
12. Heartland Shippers Conference – April 2013
Implications and Conclusions
• Freight indices create tools with lots of potential
• Derivatives and ILCC’s can have the advantage of moving pricing out of the
shipper-carrier relationship
• To date uptake of these tools has been relatively slow
• More transparency, more experience and adopters are required
• Derivatives and ILCC’s will bring evolution not revolution to the container market
• The WCI will continue to work with the market to help develop new index based
tools
• In the future these could form part of every organisation’s freight tool box to be
used as and when they deliver best advantage
13. World Container Index
15-17 Christopher Street
London
EC2A 2BS
United Kingdom
+ 44 20 7759 2146
info@worldcontainerindex.com
www.worldcontainerindex.com