Platts launches JKM Forwards price assessments on Jan 16

Following market demand for greater pricing transparency for the physical forward value of LNG cargoes in North Asia, Platts, part of S&P Global Commodity Insights, has launched JKM Forwards price assessments, effective Jan. 16.

The new assessments' guidelines and specifications are in line with industry feedback received from a market consultation, which commenced June 8: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/060823-platts-opens-consultation-on-potential-jkm-forwards-price-assessments, followed by a proposal Aug. 16: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/081623-platts-proposes-launch-of-jkm-forwards-price-assessments-on-jan-16-2024, which preceded a launch announcement Oct.19.: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/101923-platts-to-launch-jkm-forwards-price-assessments-on-jan-16-2024

The JKM Forwards price assessments are assessed alongside the existing Platts JKM full physical cargo and JKM derivatives price assessments.

Market participants expressed interest in price assessments that reflect the value of physical forward LNG cargoes. Through JKM Forwards, a full physical cargo of LNG is delivered if a company trades a defined number of physical forwards with another company in one direction (either buy or sell) for the same delivery period.

Similar mechanisms exist in forward crude oil cargo markets in Asia and Europe.

Timing

Platts assesses two JKM Forwards months after the JKM full physical cargo front month. For example, on Jan. 16, the Platts JKM full physical cargo front month is March 2024, while the JKM Forwards price assessments reflect deliveries for April and May 2024.

JKM Forwards price assessments follow the same roll logic as Platts JKM full physical cargo front-month, with the last assessed date for the promptest JKM Forwards month being the 15th, or nearest prior business day if the 15th is a holiday. For example, on Feb. 16, JKM Forwards front month rolls to reflect May 2024.

Platts JKM full physical cargo front month rolls on the 16th, or nearest subsequent business day if the 16th is a holiday, to consider M+2, with the last pricing date for M+1 falling on the 15th, or nearest prior business day if the 15th is a holiday.

Cargo convergence

Platts reflects as standard cargo convergences that stem from 10 JKM Forwards of 340,000 MMBtu each being traded in a single direction with a single counterparty for the same JKM Forwards delivery month. For example, were a buyer to acquire 10 JKM Forwards from a single seller for the same delivery month over time, but in the meantime had sold five JKM Forwards previously to the same counterparty, the forwards would not converge into a physical cargo as the net position would be five JKM Forwards.

As soon as a net long position or short position of 10 JKM Forwards with a single counterparty for the same delivery month is reached, a convergence occurs.

The standard deliverable volume for cargo convergences stemming from JKM Forwards trades is 3.4TBtu +/-5% operational tolerance, in line with Platts JKM standard cargo volume. The converged cargo is priced on a $/MMBtu basis at the arithmetic mean of the 10 forwards that make up the converged cargo.

Nominations

Platts reflects as standard: on the day of convergence to a full physical cargo, the seller first nominates an initial five-day delivery window between the 11th and 20th of the JKM Forwards delivery month. On the same day, the buyer first nominates the base discharge port, and the seller then nominates a base load port and a compatible base LNG vessel. The counterparties will report the convergence to Platts immediately for publication.

Base discharge ports nominated should be able to accommodate carriers in the standard JKM vessel capacity range.

The buyer nominates a three-day delivery window within 24 hours of the convergence. Should the convergence occur within 24 hours of the close of business of the last trading date for the relevant JKM Forwards month, the buyer will nominate a three-day delivery window by 17:00:00 Singapore time on the last pricing date (15th or nearest prior business day if the 15th is a holiday).

Final nomination deadlines, delivery locations and specifications follow Platts JKM standard terms, as described in Platts LNG methodology guide: https://www.spglobal.com/commodityinsights/PlattsContent/_assets/_files/en/our-methodology/methodology-specifications/global_lng.pdf.

Non-converged JKM Forwards

In line with other energy market physical forwards, Platts reflects trades where any outstanding front-month JKM Forwards that amount to less than 3.4 TBtu by the 15th of the month, or the nearest prior business day if the 15th is a holiday, are cash settled, unless both counterparties mutually agree to make or take delivery of these volumes as part of a physical delivery.

JKM Forwards that are cash-settled are settled against Platts last day price assessment of the relevant JKM Forwards month.

MOC timing and increments

After completing a Market-on-Close Participation Review for JKM Forwards, market participants can report bids and offers up to 16:09:59 Singapore time on Platts eWindow. 16:10:00 Singapore time is the cut-off for new bids and offers in the JKM Forwards MOC.

For price improvements made to a bid or an offer, the minimum is 1 cent/MMBtu every 20 seconds and the maximum would be 10 cents/MMBtu every 20 seconds. To repeat a bid or an offer after a trade, the initiator must do so within 20 seconds.

Market participants can report bids and offers for JKM Forwards in multiples of 340,000 MMBtu, and expressions of interest to trade are considered on a first-come, first-served basis.

JKM Forwards price assessments follow the Singapore holiday calendar.

More details can be found here: https://www.spglobal.com/commodityinsights/en/our-methodology/subscriber-notes/122923-platts-clarifies-timing-increments-for-jkm-lng-forwards-moc

Consideration of JKM Forwards in Platts JKM

JKM Forwards are assessed in line with Platts existing methodology and data hierarchy, with transparent, firm bids and offers, as well as expressions of interest to trade given the highest priority.

The existing MOC assessment processes for Platts JKM full physical cargo and cash-settled JKM derivatives in APAC remain unchanged with the launch of JKM Forwards. Full cargo indications in adherence with Platts JKM standard terms with dated delivery windows continue to take priority in the assessment process.

Platts considers JKM Forwards bids, offers and trades in the absence of competitive full physical cargo indications in the JKM full physical cargo MOC process.

Please send any feedback to LNGeditorialteam@spglobal.com and pricegroup@spglobal.com.

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