The Singapore Exchange (SGX) has launched its first ammonia swap and futures contracts today, allowing companies to hedge against price volatility as the energy transition increasingly fuels growth in the industry.
Four contracts have launched today — the SGX Argus ammonia cfr east Asia futures and swap contracts, and the SGX Argus ammonia fob Middle East futures and swap contracts. The contracts will settle against the cumulative average of Argus' spot assessments within the expiring contract month for the Argus ammonia cfr east Asia index and the Argus ammonia fob Middle East index, respectively.
The futures contracts will trade in lots of 100t, while the swap contracts will trade in lots of 500t. Each contract can be traded for up to 24 months from the current month, within Singapore hours 7.10-20.00 on UK business days.
Approximately 16mn t of ammonia was traded in 2022, but demand from new sectors in the energy transition — such as sustainable marine fuels, hydrogen carrying and co-firing for power generation — are expected to drive a dramatic increase in global ammonia demand.
The SGX contracts present opportunities to players within traditional ammonia sectors — such as industrial and fertilizer industries — to hedge against price risk. But liquidity is expected to rise within the next few years as new entrants join the market and supply of low-carbon ammonia alternatives rises.
