World-first LNG freight futures trades on CME Group

Clarksons is pleased to announce that on 23 December 2019, it completed the first LNG freight futures trades on CME between commodity traders Vitol and Trafigura.

The trade was a Q1 2020 spread between BLNG1 Gladstone to Tokyo RV and BLNG2 Sabine to Isle of Grain RV taking place just hours after the products launched on CME Group. 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.

Christian Greenop, from Clarksons' FFA team, who led the transation, said:

"We have seen an increase in demand from market participants wishing to manage freight exposure within LNG. 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."

Global seaborne trade in 2019 was 356 million tonnes and is set to grow by ~11% in 2020 (395 million tonnes) of which ~30% is traded in the spot market. It is hoped that the LNG freight futures will not only facilitate risk management but also offer transparency in an otherwise opaque market.