ICE Launches Spark30S Atlantic and Spark25S Pacific LNG Freight Futures Contracts
First day trading from some of the LNG industry’s most active market participants demonstrating strong support for the new contracts
LONDON & SINGAPORE (STL.News) Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of mortgage technology, data and listings services, today announced that the LNG freight futures contracts based on Spark Commodities’ (“Spark”) price assessments which launched on March 22, traded on the first day.
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 provide us with the ability to more proactively manage our shipping exposure,” said Patrick Dugas, Vice President, LNG Trading in Total Gas & Power.
“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 for hedging LNG freight exposure, and we are confident that liquidity will increase over the coming months,” said Christian Greenop at Clarksons.
“We have had such a positive and supportive response from the market since we announced these contracts together with Spark. The trades on the first day demonstrate the key role they will play in allowing participants to now manage freight risk alongside the commodity risk and therefore optimize their global natural gas portfolios,” said Gordon Bennett, Managing Director of Utility Markets at ICE.
The contracts allow market participants to manage price risk regarding round-trip voyages between the US Gulf Coast and northwest 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. 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.