Singapore Exchange launches its first ammonia futures contracts

SINGAPORE: The Singapore Exchange launched on Monday its first ammonia swap and futures contracts aimed at meeting hedging needs from the power sector as interest in the energy- transition fuel grows.

The SGX Argus Ammonia Middle East free on board (FOB) and the East Asia Swap/Futures cost and freight (C&F) contracts start from October and they can be traded for up to 24 consecutive contract months, William Prajogo, SGX's commodities director told Reuters.

Each contract lot is 500 metric tons for the swaps contracts and 100 tons for the futures contracts.

The contracts will trade every UK business day during Singapore time and will be cash settled using weekly prices from price reporting agency Argus.

"Ammonia is a new market and traditionally used by the fertilizers sector, but this launch is driven more by the growing demand and interest from the non-traditional sectors, including the power generation sector and potentially, the shipping and hydrogen sectors," said Prajogo.

"These contracts will be the first in Asia for the pricing points we cover, which include FOB Middle East and CFR East Asia," he added.

The Intercontinental Exchange launched an ammonia futures contract in January, based on Argus' daily price assessment for delivered ammonia cargos into northwest Europe.

SGX's target market participants include energy companies who are keen to hedge their exposure, power generation companies and trading houses globally, including from Japan, said Prajogo.

The contracts will be priced off conventional or grey ammonia produced from natural gas for a start, with liquidity expected to pick up in two to three years, he added.

The exchange also sees potential for green ammonia trading in the future as the use of low-carbon fuels is expected to rise.

Green ammonia is made using hydrogen from water electrolysis and nitrogen separated from air, with the processes powered by renewables. - Reuters