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IntroductionFigures from the book
Every active manuscript figure, compiled for the first web edition. Download SVG for scalable use or PNG for slides and documents.
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IntroductionVertical supply chain view showing the trader as a parallel value-adding layer across the execution chain. The trader creates value by reducing transaction costs, coordinating logistics and contracts, providing finance, and bearing risk between export and import.
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IntroductionResponsibility across an FOB-CFR trading chain. Note that the figure is arranged to be read from top to bottom by phase. The dashed horizontal line marks the load port point where FOB delivery occurs and risk transfers to the buyer under CFR.
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IntroductionFreight as the strategic link in bulk commodity supply chains
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EconomicsEconomic logic of regional price gaps under logistics constraints and trader response.
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EconomicsFrom Price Quotes to Trade Response.
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EconomicsOpportunity cost in vessel allocation.
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EconomicsStylised bargaining schematic for spot freight fixing.
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EconomicsHow freight control is separated from ship ownership.
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Balance SheetsFrom commodity fundamentals to freight clearing. Commodity fundamentals determine net trade requirements, which are translated into seaborne allocation and routing, trade stems, and demand for shipping services measured in tonne miles. Freight rates then clear transport demand against open tonnage and the marginal ship's reservation level.
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Balance SheetsWorking capital and liquidity in a CFR trade under a sight letter of credit. Solid arrows show the sequence within each band. Dashed links show dependencies across the commercial cash cycle, bank finance and hedge liquidity. Payment timing differs under CAD, usance LC and open-account terms.
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Balance SheetsFreight formation as a comparison between two outputs.
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Balance SheetsShort run fleet supply is relatively flat at low utilisation and steep near capacity. As demand rises from \(D_1\) to \(D_2\), equilibrium moves from \(E_1\) to \(E_2\). Quantity increases modestly, from \(Q_1\) to \(Q_2\), but freight rates rise sharply, from \(P_1\) to \(P_2\), because spare capacity is limited.
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Space, Time and FormSpace, time, and form in physical commodity arbitrage
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Space, Time and FormStorability links spot and forward prices for wheat through carry, while freight has no storage anchor. In the top panel, the dashed line is today’s spot price, the blue line is the full carry ceiling and the green line is the observed forward curve. The top panel is in USD/pmt and the bottom panel is in USD/day.
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Space, Time and FormSimplified value chain for agricultural freight trading
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Space, Time and FormTheoretical spatial transformation from FOB purchase to CFR sale
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Space, Time and FormIllustrative form transformation through multi cargo parcel-mix optimisation
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Space, Time and FormOptionality changes the commercial result while leaving spread uncertainty unchanged. Note that the action and result depend on whether the trader is long or short a call or put option.
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Space, Time and FormRelative prices move faster than capacity
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Space, Time and FormMerchandising creates value through reliable execution of committed flows. Trading creates value through preserving and exercising flexible rights under hard constraints.
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Basis TradingFormation of the net trade margin after hedging for a theoretical CFR sale done
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Basis TradingTender and delivery impose economic boundaries on basis. At the futures delivery point, basis converges towards zero as expiry approaches. Away from the deliverable market, transport costs create a band around the futures benchmark: interior cash cannot remain far below futures once tendering becomes economical, and destination cash cannot remain far above futures once taking delivery becomes economical. Note certain assumptions on transport costs are necessary for decision makers
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Basis TradingAs expiry approaches, tender and delivery economics pull basis into a narrowing corridor around the deliverable market.
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Basis TradingOptionality in FOB-to-CFR trading
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Basis TradingIllustrative monthly route basis for a Time Charter trip from region A to region B on a Handysize vessel across four years. Basis is the physical route time charter equivalent less the relevant Baltic Handysize benchmark, measured in USD/day. Positive values indicate a route premium to the benchmark, while negative values indicate a discount. The common monthly shape represents recurring seasonality, while the differences across years represent market conditions specific to each year.
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Basis TradingIllustrative example of how to think about different markets presented by market on an ordinal radar scale. Each axis is scored as low, medium, or high. Oil scores medium on volatility, high on market size, and low on capture ability. Freight scores low on volatility and market size, but high on capture ability. The shaded areas summarise relative position across axes; they are not estimated profit surfaces. Note that some freight markets can be more volatile than oil, and vice versa.
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Basis TradingAn FFA hedge structure.
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Basis TradingFreight options and their usage
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Basis TradingFinancial and real optionality in freight basis trading
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VaR Based PricingParallel workflow for VaR based freight pricing. Branch A estimates the quote specific forward value and allowed VaR. Branch B independently estimates residual basis VaR from historical hedged basis changes. The two outputs meet at the policy gate.
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VaR Based PricingA quote is accepted only if hedged VaR sits below the policy line.
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VaR Based PricingHistorical relationship between route TC and selected Baltic driver.
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VaR Based Pricing