World Sees First LNG Freight Futures Trades

London-based shipping services firm Clarksons has announced completing the world’s first LNG freight futures trades between commodity trading giants Vitol and Trafigura.

They took place on CME Group’s platform December 23, Clarksons said in a statement on January 6.

The trade was a first-quarter 2020 spread between BLNG1 Gladstone to Tokyo round voyage (RV) and BLNG2 Sabine RV to Isle of Grain (UK) RV taking place just hours after the products launched on CME Group, Clarksons explained. Three LNG freight futures (BLNG3 Sabine to Tokyo via Panama Canal being the third) are now listed on CME Group and are based on the Baltic Exchange assessments.

“We have seen an increase in demand from market participants wishing to manage freight exposure within LNG,” Christian Greenop, who led the transaction from Clarksons’ forward freight agreement team, commented. “In 2019, 160,000m³ TFDE tonnage traded in the single voyage market in the low $10,000/day RV basis during April and broke the $170,000/day RV basis mark in October, so a risk management tool is particularly useful given this level of volatility.”

According to Clarksons, global seaborne LNG trade reached 356mn mt in 2019, 30% of which was on the spot market, and is poised to grow by 11% in 2020. LNG freight futures will help manage risks and create greater transparency, the firm said.