CONTAINER futures pioneer Clarksons has closed its swap desk because of a lack of interest in Forward Freight Agreements (FFA) that it once predicted to become major hedging instrument when first sold in January 2010.

But most carriers and major shippers rely on long-term contracts to avoid the short-term fluctuations in spot market rates that the derivative swaps were designed to guard against, reported Alphaliner.

"Depressed freight markets also provided little incentive for carriers to hedge forward revenue to the current low rate levels. Until such a time when freight rates become attractive enough for carriers to lock in future income using hedges, interest in container swaps is expected to remain low," said Alphaliner.

Three London brokers (FIS, ACM/GFI and ICAP) joined Clarksons in promoting swaps. Morgan Stanley, Credit Suisse and HSH Nordbank also participated, but found few customers.

FIS left the market in 2012 while ACM/GFI departed last April. ICAP has scaled down its activity in September 2013, said the report.

Clarksons first said derivatives would take hold in two years, reaching 5-10 per cent of the physical market by 2012 relying on the success of FFAs in bulk markets, which also took years before acceptance.

While container swap volume traded through the London is not publicly available, it is estimated that it only amounts to several hundred TEU a week, said Alphaliner.