Singapore Exchange (SGX) has expanded its clearing services through the addition of three new forward freight agreement (FFA) and futures contracts for Liquefied Natural Gas (LNG) vessels.

The new contracts were launched on July 12 and are listed out to three years forward.

The FFA and futures contracts reference the Baltic Exchange’s independent freight price assessments for LNG transported on LNG-powered carriers on the three routes that make up the bulk of global spot market LNG flows.

The routes are namely from Australia to Japan, US Gulf to Europe and US Gulf to Japan.

The first trade on the launch day was brokered by SSY Futures.

According to SGX, the demand and supply for LNG reached an all-time high of 356.1 million tonnes (MT) in 2020 despite the Covid-19 pandemic.

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Asia accounts for over 70% of global LNG imports. Demand in the region continues to grow.

“Asia plays an important role in the LNG freight market given the region’s geographical proximity to the epicentre of LNG trade flows,” says William Chin, head of commodities at SGX.

“Our expansion into LNG freight marks a milestone in SGX’s FFA business since we cleared the first FFA OTC swap in 2006.”

“We will continue to build a suite of products that complements the physical market’s green movement and transition to cleaner energy sources, and in this case, risk management tools relating to LNG-powered carriers which have a relatively lower carbon footprint compared to conventional LNG carriers,” says Chin.

“We’re delighted in this vote of confidence in the Baltic Exchange’s LNG freight assessments. Our data is based on assessments made by some of the leading physical shipbroking companies in this space with quality assured by our strict governance structure,” says Mark Jackson, Baltic Exchange chief executive.

Shares in SGX closed flat at $11.40 on July 13.

Photo: Bloomberg