SGX expands clearing services for seaborne freights

The Singapore Exchange adds three new Forward Freight Agreement and futures contracts for LNG vessels.

The Singapore Exchange (SGX) on Monday launched three new Forward Freight Agreement (FFA) and futures contracts for liquified natural gas (LNG) vessels.

This expands the SGX’s clearing services for seaborne freights.

The contracts are listed out to three years forward, referencing the independent freight price assessments of the Baltic Exchange for LNG transported on LNG-powered carriers from Australia to Japan, US Gulf to Europe, and US Gulf to Japan. These three routes constitute the bulk of the global spot market for LNG flows, serving as benchmark pricing for LNG freight.

“Asia plays an important role in the LNG freight market given the region’s geographical proximity to the epicentre of LNG trade flows. Our expansion into LNG freight marks a milestone in SGX’s FFA business since we cleared the first FFA OTC swap in 2006,” said William Chin, head of Commodities at SGX.

Global LNG trade reached an all-time high of 356.1 million tonnes in 2020, with Asia accounting for over 70% of global LNG imports. Japan and China are the top LNG importers, accounting for 40% of last year’s total.

LNG requires highly specialised and sophisticated vessels to transport, and its freight cost can significantly impact the delivered price of LNG, making it critical for industry participants to protect against price volatility.