An extreme oversupply and tightness over the past year have created volatility within the LNG market. However, LNG demand is expected to reach 700 million tonnes by 2040, as it plays a key role in the initial stages of an energy transition.
While the freight-born gas LNG, is looking as though it will remain a volatile market for some time before rebalancing, the volatility will weigh on chartering costs and ultimately result in movement on price. Forward Freight Agreements (FFA) will act as a tool to effectively manage risk and freight exposure.
ARRACO Global Markets is joined by thought leaders from the Singapore Exchange (SGX) and The Baltic Exchange as we share insights on the latest developments in the LNG FFA market.
Tom Roberts, CEO of ARRACO Global Markets, said:
"In times where it is so volatile, there is an element of people being worried about putting risk on a liquid instrument. However, in these super volatile markets, FFA's are fantastic instruments to be able to hedge those exposures and should enable the development of it."
Below we discuss how LNG shipowners and charterers can use LNG FFA to navigate market volatility and the benefits of clearing and margining.