Photo: Illustration. Courtesy of Vitol

ICE launches two Spark Commodities’ based LNG freight futures contracts

Intercontinental Exchange said that the LNG freight futures contracts based on Spark Commodities’ price assessments which launched on March 22, traded on the first day.

ICE launches two Spark Commodities' based LNG freight futures contracts
Illustration. Courtesy of Vitol

First-day trading included 15 lots of Spark30S Atlantic and 15 lots of Spark25S Pacific LNG freight futures contracts for the June 2021 contract expiry. These trades involved some of the LNG industry’s leading market participants including Total, Gunvor, Vitol, and Glencore, and were brokered by Clarksons, showing strong support for the new contracts.

“The unprecedented price volatility observed on the chartering market this year has underpinned the need for a derivative product allowing us to hedge the shipping capacity of our LNG portfolio and to position ourselves to benefit from arbitrage opportunities arising in the market. The LNG Freight Futures contracts on ICE provides us with the ability to more proactively manage our shipping exposure” said Patrick Dugas, vice president, LNG Trading in Total Gas & Power.

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“We are happy to complete the first Spark30S Atlantic and Spark25S Pacific LNG Freight Futures trades on ICE and continue to work very hard in developing the LNG FFA market. There is a great demand to hedge LNG freight exposure and we are confident that liquidity will increase over the coming months,” said Christian Greenop at Clarksons.

The contracts allow market participants to manage price risk in respect of round-trip voyages between the US Gulf Coast and North West Europe (Spark30 assessment); and Australia and Japan, Korea, Taiwan and China (Spark25 assessment).

The numbers in the contract names indicate the number of days it takes an LNG vessel to complete a return voyage on the respective routes, with the settlement of the contracts based on the Spark30S (Atlantic) and Spark25S (Pacific) LNG freight spot price assessments.

ICE’s LNG freight futures contracts are traded and settled in USD per day, and monthly contracts from April 2021 to December 2023 are available to trade and clear alongside the global natural gas benchmarks on ICE including TTF, JKM, Henry Hub, NBP, and WIM LNG (Platts) futures, offering the market a liquid and capital efficient environment to manage global gas price risk.