SGX LSFO contracts gain momentum as freight forward agreements enter strong start in Q1

The Singapore Exchange (SGX) on Tuesday (5 May) said the SGX Platts Marine Fuel 0.5% FOB Singapore contract saw increased activity in March and April on the back of a surge in SGX freight volumes. 

Activity over the first four months of the year totalled 385,000 contracts, up 9% from the same period a year ago, with March performing particularly well at over 120,000 contracts. 

Volumes were driven by heightened market uncertainty and supply chain disruptions resulting in increased hedging demand, it noted.

0.5% Marine Fuel volumes correspondingly rose to almost 180,000 metric tonnes in March and April, 200% higher than total volumes since launch in November 2019, with open interest now standing at over 100,000 metric tonnes.

Bunker fuel prices have declined sharply this year (from $600/MT to $200/MT), in line with crude oil, as demand was pummelled by the Covid-19 pandemic. 

SGX said its suite of fuel oil contracts offers bunker and freight clients with effective risk management tools to hedge their bunker fuel price exposure during this period of heightened volatility.

SGX explains its freight and fuel oil contracts provide the shipping industry with critical risk management tools to manage price volatility, all on a single platform. 

Thus, it remains the largest clearing venue for dry bulk freight market with 60% market share in the first four months of the year, with clients benefitting from cross margin efficiencies of up to 40% between freight and low sulphur fuel oil contracts. 

Published: 6 May, 2020