Photo: Illustration only (Courtesy of Maran Gas Maritime)

ICE, Spark Commodities partner up on new LNG freight futures

Intercontinental Exchange plans to launch liquefied natural gas (LNG) freight futures contracts based on Spark Commodities’ price assessments.

These new contracts called the Spark30S Atlantic and Spark25S Pacific LNG Freight Future contracts are traded and settled in USD per day.

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, ICE said in its statement.

The settlement price of the contracts are based on the Spark30S (Atlantic) and Spark25S (Pacific) LNG freight spot price assessments. Market participants can use the contracts 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).

ICE plans to launch these cash-settled futures contracts on March 22, 2021, subject to regulatory approval.

These new freight contracts will form part of ICE’s global natural gas complex as the market manages freight price risk alongside existing TTF, NBP, Henry Hub, JKM LNG (Platts) and WIM LNG (Platts) contracts.

“We have been in close engagement with the LNG market for more than two years about the right assessment on which to base LNG freight futures. During that time, LNG freight markets have become increasingly volatile, significantly increasing demand for suitable LNG freight risk management tools,” said Gordon Bennett, managing director of utility markets at ICE.

Tim Mendelssohn, managing director at Spark, added that after a summer of LNG freight rates at record lows, this winter followed with the highest LNG freight rates ever assessed, peaking at $322,500/day on January 8, 2021.

“This volatility necessitates new risk management tools as well as future-orientated, tech-driven price discovery platforms”, he said.