S&P Global Commodity Insights launched the first daily LNG price assessment for cargoes trading in Asia – Platts JKM™ – in February 2009. As global supply and market participation grow, the uptick in spot trading liquidity has seen the Platts JKM™ being increasingly used as the basis for trades both in and outside Asia.
While the LNG market continues to be made up largely of legacy long-term contracts, there is a marked shift in recent years towards shorter-term and spot deals.
LNG spot transactions, where trades are concluded for delivery in the next three months from the transaction date, totalled over 1400 in 2018, or more than 25% of global trade volumes, according to a recent LNG industry report.
The industry is gradually moving towards more market-based pricing, linking short- and medium-term contracts to LNG-related price assessments; simultaneously, oil-related pricing – the main long-term contractual reference – is on the wane. This trend increases as LNG spot market activity grows, and participation in nearby trade expands.
As the traded volumes in the LNG market expands, so do the product’s fundamentals start to become more visible in its pricing. Consequently, LNG prices are emerging as distinct from related hydrocarbon markets. Daily LNG spot prices transparently reflect the tradeable market value for LNG bought and sold each day.