Freight Investor Services, the leading brokerage for freight and commodity swaps, has deepened its partnership with Cleartrade Exchange to promote increased price transparency and liquidity in the fertilizer swaps market.
The FIS fertilizer swaps broking desk is distributing the Cleartrade Exchange screen free of charge to clients from today and is encouraging traders to use it to risk manage their exposure across the available six cleared fertilizer contracts.
The Cleartrade Exchange screen is available free in ‘view-only’ mode to any approved FIS client and can be accessed via simple download.
Ron Foxon, senior FIS fertilizer swaps broker, said:
“The roll-out of the Cleartrade screen means traders world-wide will be able get an instant snapshot of market activity and bids / offers circulating in the forward fertilizer market. We believe the Cleartrade screen will prove to be an essential tool for all participants in the fertilizer industry and for traders in other related commodity sectors such as grains and energy.”
Richard Baker, CEO of Cleartrade Exchange said:
“Cleartrade Exchange was designed from the outset to be a multi-commodity trading venue, which would create new opportunities to build cleared swaps liquidity. The fertilizer swap market has become well established over the past few years. This partnership will grow the market further.”
A view-only screen allows traders to track FIS prices across six contracts in the Nitrogen (Urea & UAN) and phosphate (DAP) markets. FIS customers can also apply to upgrade to a live tradable Cleartrade Exchange screen that allows them to hit and lift bids and offers in the market and execute trades for clearing.
The Cleartrade Exchange screen is the first fully-regulated and cleared trading screen to deploy in the global fertilizer market, which had an estimated turnover of $500 billion in 2008 with some 1 billion tonnes of raw materials and products traded.
The price volatility of the fertilizer market is clearly apparent from the graph below. The fob Egypt Urea price per tonne is currently more than $200 higher than the like period of 2010 (May 2010 $233/tonne to $437/tonne May 2011) and has spiked by $100 between March and May 2011.
Figure 1: Fertilizer price history, May 2010-May 2011 (Source FIS)
This clearly demonstrates the need for risk management tools that allow traders to hedge their price risk and protect margins.