Freight Forward Agreements + Liquidity

“Is the FFA market liquid enough?” It’s one of the most common questions about Forward Freight Agreements (FFAs). Like many things, the answer is: it depends.

Over the past 12 months, the SGX Group cleared ~2.25 million dry bulk FFA contracts. Each contract represents one vessel day. Let’s put that in perspective:

• The global dry bulk fleet consists of ~13,600 vessels, amounting to ~5 million vessel days annually.

• This means the FFA derivative market accounts for ~45% of the underlying physical market.

In terms of dollar volume, ~$175 million worth of FFAs trade daily, with $110 million focused on Capesize FFAs.

Comparatively, Star Bulk —the most liquid dry bulk shipping stock—trades at an average of ~$28 million per day.

The FFA market is like a swimming pool. You don’t want to dive headfirst into the shallow end (Handysize), but there’s plenty of water for a cannonball in the deep end (Capesize).