SINGAPORE - The Singapore Exchange (SGX) 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 (CFR) contracts start from October and they can be traded for up to 24 consecutive contract months, SGX commodities director William Prajogo said.

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

The contracts will trade every British 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 fertilisers sector, but this launch is driven more by the growing demand and interest from non-traditional sectors, including the power generation sector and, potentially, the shipping and hydrogen sectors,” said Mr 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 north-west Europe.

SGX’s target market includes energy firms keen to hedge their exposure, power generation firms and trading houses globally, including from Japan, he said, and the contracts priced off conventional or grey ammonia produced from natural gas for a start, with liquidity expected to pick up in two to three years.

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