Platts proposes launch of JKM Forwards price assessments on Jan 16, 2024

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 proposing to launch JKM Forwards price assessments, effective Jan. 16, 2024.

The proposal is 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

These proposed JKM Forwards price assessments would be assessed alongside the existing Platts JKM full physical cargo and JKM derivatives price assessments.

Market participants have expressed interest in price assessments that reflect the value of physical forward LNG cargoes. Through JKM Forwards, 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. Similar mechanisms exist in forward crude oil cargo markets in Asia and Europe.

Platts invites market feedback on the proposed standard terms to be reflected in its JKM Forwards price assessments.

Timing

Platts would assess three JKM Forwards months after the JKM full physical cargo front-month. For example, on Jan. 16, 2024, Platts JKM full physical cargo front-month would be March 2024, while the JKM Forwards price assessment would reflect deliveries for April, May, and June 2024.

JKM Forwards price assessments would 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, 2024, JKM Forwards front month would roll 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 proposes to reflect as standard, cargo convergences that stem from 10 JKM Forwards of 340,000 MMBtu each being traded in a single direction with a single counterpart for the same JKM Forwards delivery month.

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

Nominations

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

Thereafter, the buyer would nominate a three-day delivery window as soon as reasonably possible. Final nomination deadlines, delivery locations and specifications would 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 proposes to reflect trade 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 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 would be 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 would be able to report bids and offers up to 16:09:59 Singapore time on Platts eWindow. 16:10:00 Singapore time would be the cut-off for new bids and offers in the JKM Forwards MOC.

Market participants would be able to improve these bids and offers up to 10 cents every 30 seconds. Market participants would be able to report bids and offers for JKM Forwards in multiples of 340,000 MMBtu, and expressions of interest to trade would be considered on a first-come, first-serve basis.

JKM Forwards price assessments would follow the Singapore holiday calendar.

Consideration of JKM Forwards in Platts JKM

JKM Forwards would be 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 would remain unchanged with the launch of JKM Forwards. Full cargo indications in adherence with Platts JKM standard terms with dated delivery windows would continue to take priority in the assessment process.

Platts would consider 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 by Sept. 26.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.