Clarksons wraps up first CME Group LNG freight futures trade

Illustration only. Image source: Pixabay under CCO Creative Commons license.

Shipping services group Clarksons completed the first LNG freight futures trades on CME between commodity traders Vitol and Trafigura at the end of December 2019.

The trade was a first-quarter 2020 spread between BLNG1 Gladstone to Tokyo RV and BLNG2 Sabine to Isle of Grain RV taking place just hours after the products launched on CME Group.

Three LNG freight futures (BLNG3 Sabine to Tokyo via Panama canal being the third) are now listed on CME Group and are based on the Baltic Exchange assessments, Clarksons said in its statement on Monday.

Christian Greenop, who led the transaction from Clarksons FFA team, said, “We have seen an increase in demand from market participants wishing to manage freight exposure within LNG. In 2019, 160,000-cbm TFDE tonnage traded in the single voyage market in the low $10,000/day RV basis during April and broke the $170,000/day RV basis mark in October, so a risk management tool is particularly useful given this level of volatility.”

Global seaborne trade in 2019 was 356 million tonnes and is set to grow by ~11 percent in 2020 (395 million tonnes) of which ~30 percent is traded in the spot market.

It is hoped that the LNG freight futures will not only facilitate risk management but also offer transparency in an otherwise opaque market, Clarksons said.

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