Platts opens consultation on potential JKM Forwards price assessments

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, is opening a market consultation on the potential to launch daily JKM Forwards price assessments from January 16, 2024.

Via this note, Platts is inviting market feedback on all aspects of its proposed JKM Forwards price assessments, which would be assessed alongside the existing Platts JKM full physical cargo and JKM derivatives price assessments.

Market participants have indicated demand for price assessments that reflected the value of physical forward LNG cargoes traded by partialization, whereby a full physical cargo of LNG would be delivered if a company were to trade a defined number of physical forwards with another company in one direction (either buy or sell) for the same delivery period.

JKM Forwards would seek to reflect such activity and would be assessed according to Platts existing data hierarchy, with transparent and firm bids, offers and expressions of interest to trade given the highest prioritization.

Platts is seeking feedback on the launch of JKM Forwards in this consultation, including but not limited to the following aspects:

TIMING

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

Platts is seeking feedback that the first JKM Forwards month being assessed would be the equivalent of the JKM physical cargo month plus one. For example, were the JKM Forwards price assessments launched on January 16, 2024, the Platts JKM front-month would be March 2024 and the first assessed JKM Forwards month would be April 2024.

JKM Forwards price assessments would follow the same roll logic as Platts JKM, with the last assessed date for the closest JKM Forwards month being the 15th of M-2, or the nearest prior business day.

CARGO CONVERGENCE

Platts JKM standard cargo volume is 3.4TBtu +/-5% operational tolerance. Platts is seeking feedback on the standard and only deliverable volume for cargo convergences via JKM Forwards being 3.4TBtu +/-5%.

Platts also seeks feedback from market participants on the number of JKM Forwards traded in a single direction with a single counterpart that would be considered standard to achieve convergence to a full physical forward cargo.

For example, were five the number of JKM Forwards needed for full cargo convergence, a company would need to trade five, 680,000 MMBtu JKM Forwards in one direction with a single counterparty for the same JKM Forwards delivery period to reach cargo convergence. For example, were 10 the number of JKM Forwards needed for full cargo convergence, a company would need to trade 10, 340,000 MMBtu JKM Forwards in one direction with a single counterparty for the same JKM Forwards delivery period to reach cargo convergence.

Platts is therefore seeking feedback on the volume to be considered as standard in its JKM Forwards price assessment.

NOMINATIONS

Platts publishes standard terms for Platts JKM and its other benchmark LNG price assessments. Physical cargo convergences considered in the JKM Forwards price assessments would follow the existing Platts JKM standard nomination and delivery terms.

Platts would consider it standard in JKM Forwards for nomination of the initial delivery window within the delivery month to be provided as soon as cargo convergence is achieved and reported to Platts as soon as reasonably possible. In addition, the buyer would provide base discharge port and the seller would provide base LNG vessel and load port at the time of convergence and report these to Platts as soon as reasonably possible. Final nominations would be in line with Platts existing JKM standard nomination and delivery terms.

DELIVERY WINDOW

Platts is seeking feedback on which dates within the delivery month would be considered as standard to nominate as initial delivery window for its JKM Forwards price assessments.

Platts JKM standard for delivery windows is an initial three-day, narrowed by the buyer up to 30 days prior to the initial delivery window to a final one-day delivery window.

NON-CONVERGED JKM FORWARDS

In other large energy cargo markets that trade in physical forwards, any non-converged forwards are cash-settled against a price assessment published by a Price Reporting Agency (PRA). In these physical forward markets, the price assessment on the last trading day of the relevant physical forward month is used as the basis for cash settlement of outstanding non-converged partials.

Platts is seeking feedback on reflecting as standard a similar process for JKM Forwards.

Platts would publish bids, offers and expressions of interest to trade JKM Forwards on its eWindow communication tool from all companies that have gone through a relevant MOC participation review process.

Platts JKM Forwards price assessments would be published daily alongside existing JKM physical and derivatives price assessments.

JKM FORWARDS AS FALLBACK MECHANISM

The existing MOC assessment processes for Platts JKM and cash-settled JKM derivatives in APAC would remain unchanged by the launch of JKM Forwards, with full cargo indications, adhering to Platts JKM standard terms with dated delivery windows, continuing to take priority in the assessment process. However, Platts is seeking feedback on considering JKM Forwards bids, offers and trades in the absence of competitive full physical cargo indications in the JKM cargo MOC process.

Please send any feedback to LNGeditorialteam@spglobal.com and pricegroup@spglobal.com by July 31, 2023.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing.