LNG freight assessments are part of the Baltic’s suite of regulated benchmarks which include dry bulk, tanker, gas, container, air freight and investor indices.

Our data is published in compliance with the EU Benchmark Regulations (BMR) and IOSCO principles for Financial Benchmarks while the UK’s financial regulator the Financial Conduct Authority (FCA) provides oversight of our data production processes.

The Baltic Exchange has been approved and authorised by the FCA, by way of the EU Benchmark Regulations, since March 2020. Our indices are audited annually by PwC and have consistently received the highest rating possible.

We want to help build a world-class infrastructure to support companies involved in the movement of LNG by sea and help them manage their freight risk by providing transparency to the physical movement of LNG in gas carriers.

Benchmarking commercial activities against a trusted index is the foundation for development of flexible risk management and making informed commercial decisions. The transportation of LNG is evolving from vessels entering into long-term contracts on delivery from the shipbuilding yard, to being traded on a spot basis. The number of transactions each year is increasing, but the distribution of transactions is not evenly spread throughout the year and a reliable assessment of what a charterer is willing to pay, and what an owner is willing to accept, is key to establishing confidence in growing the spot market.

The Baltic Exchange has been here before: we have changed the way the dry bulk, dirty and clean tanker risk by providing credible benchmarks. We now produce over 200 benchmarks across dry bulk, wet, gas, container and air freight markets, with 83 relevant contracts tradeable across four different clearing exchanges. Trading FFAs is an activity which hundreds of shipping market participants undertake.

We achieve this by working with brokers, owners, charterers and traders to build consensus around a set of assessments. We have worked behind the scenes to bring competing parties together, encouraged clearing houses to look at freight as an asset class and educated the market on how derivatives could work as a risk management tool.

The use of index-linked floating contracts in the gas markets for shipowners, charterers and traders is relatively new. An index-linked contract secures the vessel to carry the cargo but allows decisions about the financial risks to be managed separately. The ability to benchmark a long-term gas freight contract, against a robust and trustworthy index, which comes under the umbrella of a UK regulated entity, provides market participants with confidence that their trades are underpinned by audited, verifiable and completely independent data.

Our vision is to support the development of a mature market for seaborne LNG freight. This paper explains our capabilities.

• How we construct our indices and ensure accurate assessments • Roles of the Baltic Exchange and our panellists • Key takeaways of the Baltic LNGg Index • Our governance and oversight framework • How to create an index-linked contract • How Forward Freight Agreements can • mitigate the effects of rate volatility